Nissan Dealers Join Chevy in Price Gouging for Electric Cars

By Brad Berman · March 21, 2011

The laws of supply and demand are in full force when it comes to electric cars—and no automobile brand will be spared. Since last August, months before the first production cars rolled off the line, we've been hearing about outrageous dealer premiums, between $5,000 and $20,000, getting added to the Chevy Volt. With gas prices on the rise, and bad news about the effects of the earthquake in Japan on car production, Nissan dealers are also taking advantage of the situation.

“Gouging is alive and well, and will be increasing as the Leaf arrives in the U.S.,” posted Laura in Marin, a user on PluginCars.com. In the past few days, she called more than 15 Nissan dealers throughout Northern California, hoping to find a LEAF that had been pre-ordered but not claimed. Laura thought she had found one at Nissan Santa Cruz—that is, if she was willing to rush to the dealership and pay $5,000 above MSRP. A few hours later, she was told the car was already leased to another customer. “They are promoting bidding wars, and they have no concept of customer service.”

Nissan and General Motors spokespersons have both said their companies are discouraging dealers from charging above MSRP—but ultimately don't have control over the final price. Nissan customers who pre-ordered a LEAF are able to lock in a price with a refundable $99 deposit. The price gouging on the LEAF occurs when those cars are delivered to a dealership, but the customer decides not to complete the transaction.

Reports of premiums of $5,000 or more on Chevy Volts have been reported in the San Francisco Bay area and in Houston. A few weeks ago, Motor Trend reported that a Florida Chevy dealership wanted $65,590 for a Volt, and Automotive News said that an L.A. man refused to pay a $5,000 premium on a Volt and decided to get on the LEAF waiting list instead.

Yet, as indicted by Laura's experience, Nissan LEAF dealers and sales staff are not immune to hiking up the price. In fact, Paul Scott, a long-time advocate of electric cars and a salesperson at Nissan Santa Monica told PluginCars.com in January: “We're going to sell [the LEAF] to whoever pays the most for it. We have a long list of people willing to pay way over MSRP.” At that point, he said high demand will continue and grow when gas makes its inevitable climb back to $4 a gallon and higher.

Paul was right about gas prices. The U.S. Department of Energy reported today that the average price of regular gasoline in California—the biggest market for electric cars—is $3.96. While most consumers consider $4 gas to be gouging, owners of gas-powered cars have no choice but to pay through the nose and keep on paying. Meanwhile, shoppers of electric cars can take comfort in two things: If you're willing to make enough calls and wait a little while, then it's very likely that you'll find a LEAF at MSRP. And after the purchase is made—even if a dealership overcharges—OPEC and Big Oil will no longer have you over a barrel.

About the author

· Brad Berman

Bradley Berman is the editor of PluginCars.com. Brad writes about alternative energy cars for The New York Times, Detroit Free Press, Reuters and other publications. He is quoted in national media outlets, such as CBS News, ABC News, CNBC, CBC, and MarketWatch. Mr. Berman is a tireless researcher of the green car market. He is the transportation editor at Home Power magazine.

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Comments

· Tom Moloughney · 1 year ago

I don't really consider it gauging, this is really just the free market at work. We're not talking about temporarily raising the prices of drinking water, heating oil or food during a natural disaster, that's gauging. You don't NEED a volt or LEAF.

I don't hear anyone feel sorry for dealers when they have to sell an unpopular car below dealer cost just to get it off the lot. They have a hot product and they want to maximize their profit. As a consumer you can decide not to patronize dealers that do this and if enough people do the same, then these dealers will suffer the long term effects and lose out to dealers that don't sell over MSRP. All you have to do is wait a while until production ramps up and you'll be able to get either of these cars below MSRP.

· Hodad66 · 1 year ago

charge more? I'll just drive an ICE longer.... no biggie, your loss.

· Evil Attorney · 1 year ago

I agree that there is nothing technically wrong with selling a car over MSRP. Dealers own businesses and can run them anyway they want. That said, I think it is a quick way to develop bad will with customers, especially in the internet age of forums and social media where info spreads quickly. If I see that a dealer is eager to take advantage of supply issue like this, it makes me think that they will pull all kinds of tricks to jack up the price of any other car they sell. I think most people have a similar perspective. So, go ahead and sell over MSRP.

I applaud Nissan for at least making an effort to lock in MSRP prices for pre-orders. I'm surprised Chevy didn't do something like that.

· Christof Demont... · 1 year ago

Tom,
Of course, the longer you wait, the more likely it is you'll miss out on substantial state and federal tax incentives, with the state incentives potentially drying up extremely quickly, as they well know in California.

Also, it's a bit unclear to me -- can a dealer gouge on a leased vehicle as well (I don't think they can, but this story made me think they might be able to).

If dealers can't gouge on leases, that would be one way to escape huge price mark-ups.

· darelldd · 1 year ago

Yeah, I'm not too clear on where that "gouge" line is.... and what the difference is between capitalism and gouging. As Tom points out, buying a certain type of car is not a "need" like food and shelter. I have trouble thinking of anything as gouging when the item doesn't need to be purchased. If a certain ipod is selling at $100, and suddenly there is a shortage of them, is the guy who starts charging $150 now "gouging?" You can't get gouged if you don't purchase. The choice is yours - not the seller's. How about if Nissan just moved the MSRP up? Would the MSRP price then be gouging or not?

And as Brad points out - we are (I mean those of you who "need" it are...) being gouged every day for gasoline. I mean.. what's the MSRP on gasoline?

· Samie (not verified) · 1 year ago

While I agree with others that car dealers can charge whatever they want, I do think that type of behavor can dampen general interest in electric vehicles. Oh I would stop short of calling what car dealers are doing as capitalism. The fact is that consumers are restricted by state laws reducing markets such as internet sales or say car dealerships controlled by automanufacturers.

· JJJJJJ (not verified) · 1 year ago

Tom is exactly right. We're not talking about $15 loads of bread here, it's a luxury purchase.

Don't want to pay the premium? Then wait 6 months. Gouging is when you pay the obscene price or you're dead (like the bread or water)

Now, if the dealer HAD guaranteed a price, and then hikes it up when you show up...then you have a valid complaint.

· darelldd · 1 year ago

> I do think that type of behavor can dampen general interest in electric vehicles. <
I'm not so certain. First off - this doesn't only happen with EVs. It has happened with all supply-limited vehicles. The Prius was also famous for it. And just like with bidding on eBay - the more people who show interest at a higher price, the more people seem to want that limited item at the higher price. If anything, supply limitation seems to just increase interest since higher demand-driven pricing seems to make the news and feed the frenzy.

This is all short-term stuff though. And while demand remains higher than supply, there are no worries of dampened interest.

I agree that this reflects poorly on the dealer - and that's the dealer's choice to risk losing future business for a few bucks in the hand right now. I see this all the time in the contracting trades. When business is good, they don't return calls, don't show up for work on time, raise the rates, etc. When business is poor, they come hat in hand and wonder why nobody wants to offer them business.

· Anonymous (not verified) · 1 year ago

The "gouging" may be a very good thing in the long run as this proves to the rest of the auto industry to long term viability of electric cars. As auto makers in the past may hesitate to invest in electric cars, seeing electric models sell at a substantially higher price can spur new investments and new lower priced models down the road. Just look at everything out there which are considered outrageously overpriced, eventually there will be an alternative. In the end the invisible hand of capitalism will do its job.

· Samie (not verified) · 1 year ago

Anonymous, what? That makes no sense. What you are forgetting is the production side of things. You need to scale up production to reduce supplier &/or labor costs, reduce MSRP, increase company profit margins, & more investment which can advance/innovate the product. One of the common ways to do this is through general (not niche) demand. Also, consumers need to share risks with producers in order to advance the product towards a general mass market.

darelldd while I agree with most of your comments I would say two things.

1. Consumers don't have all the available markets to explore. This would reduce some of the gouging behavior if say you truly could go online & buy the vehicle.

2. Lets not dismiss ICE alternatives. Sure there will always be early adopters who want the latest thing (sometimes motivated by special interests/causes). But to a normal Joe with a family he may opt out of buying an EV when ICE alternatives with no or little markup is available.

We have to look at general consumer preferences along with personal utility to determine if enough people will want to share risks with car companies. If there are not enough who lease/ buy (buying is more important) we will see less innovation in the short-term and less producer market based incentives to advance the product towards a mass scale.

· Scott Z · 1 year ago

This is not gouging in my mind either. You do not need a Leaf to live. My prius will suit me fine till production allows for MSRP or less.

· Brad Berman · 1 year ago

It might be useful to consider an expert opinion on the use of the term "price gouging" in this case. Lo and behold, Michael Giberson has already weighed in. He's an instructor and research associate with the Center for Energy Commerce in the Rawls College of Business at Texas Tech University, where he teaches energy economics and topics in alternative energy and electric power.

http://knowledgeproblem.com/2010/08/09/chevy-volt-and-the-definition-of-...

He writes about the need for a sense of "unfairness" plus an "emergency or desperate situation."

Excerpt:

While there isn’t an emergency, there is a certain urgency involved. If you want to be the first on your block to drive a Volt, obviously you need to get your Volt before one of your neighbors gets one...I think this urgency aspect makes “price gouging” seem like the appropriate term in these more casual usages.

To be clear, I think an emergency or desperate situation is part of the definition of a prototypical case of price gouging. If you want a good example of price gouging, you need the desperate situation. It is common for legal definitions of price gouging to require an emergency condition. It is just that it is also possible to properly use the English phrase “price gouging” in cases that lack a desperate situation. Even in casual usage however, not anything goes. For the term “price gouging” to be appropriately applied, you still need a price judged as unfairly high and you need some sort of difficulty or urgency or other constraint on the consumer, however attenuated such constraint may be.

· George Parrott (not verified) · 1 year ago

Almost, but clearly not all, early Nissan Leaf customers will be getting their cars at or below MSRP. Given the way that Nissan corporate is taking the actual orders for the cars from ALL the early interested customers, and then only after the customer has a specific configuration vehicle ordered from Nissan, only THEN, does the customer finalize WHERE that vehicle will be for it's final delivery. The customer can send their car to ANY dealer, and in contrast to almost every prior vehicle distribution plan, the dealership does NOT have a specific allocation of cars, but the customers actually allocate the Leaf car TO the dealer.

Thus, there will clearly be a few times where a pre-ordered car, at a pre-determined order price to that FIRST/original customer is rejected by that customer and becomes then an "orphan." Orphan cars at that point become "market sales items" with whatever the impulse customer is willing to pay. Careful Leaf customers, who have pre-ordered their cars and waited through the (horrible, cloudy, and sometimes random) pre-delivery process receive their cars at BELOW MSRP is most cases. Bay area Leaf dealers, to original order customers, appear to be discounting those cars $1000 to $1700 BELOW MSRP. (Note: We got ours from North Bay Nissan with delivery on 17 February at over $1700 below MSRP, but I ordered it back in August of 2010).

· Alan (not verified) · 1 year ago

I have a very simple way of dealing with companies that 'gouge' their customers - I do not buy! - free market works both ways, and if you really want to pay the marked up price, then you are free to do so. Free, means you are free to shop around as well. You will no doubt find the best deal and the dealership may lose you but will make the sale to the sucker who is too lazy to find the best deal and will pay the inflated price to pay for the 'cool' factor - everyone wins !! its a crazy world.....

· Tom Moloughney · 1 year ago

I guess it's all a matter of opinion, but as I said before I cannot really call this price gouging(and I spelled it right this time!)

The reason Michael Giberson used to qualify it as such was "If you want to be the first on your block to drive a Volt, obviously you need to get your Volt before one of your neighbors gets one...I think this urgency aspect makes “price gouging” seem like the appropriate term in these more casual usages." seems very weak to me. If you desire to be the first to own the latest, greatest technology, you need to be prepared to pay a lot for it. I remember when an acquaintance told me how he just bought a plasma television. They had just come out and it cost him $5,000. About a year and a half later I bought a plasma television that was bigger and had better picture and sound quality for $1,800. Was he gouged because he wanted to be the first on the block with a plasma TV? I don't think so.

Anyway, the MSRP stands for manufacturers SUGGESTED retail price, and it just a starting point for negotiation, right? We almost always buy cars under MSRP (educated consumers at least) do the dealers call us thieves? These cars aren't the only ones to sell over MSRP, whenever there is a limited edition Mustang, Corvette or other desirable make they usually all sell over MSRP.

I just can't see how this can be called gouging. It's capitalism.

· Brad Berman · 1 year ago

Okay capitalists, what do you say to this LEAF now on eBay for a starting bid of $55,000 from a private seller? Maybe I should buy my LEAF instead of lease, drive it for a while, and then double my money.

http://cgi.ebay.com/ebaymotors/SL-Black-100-Electric-RARE-SOLD-OUT-TILL-...

· dgpcolorado · 1 year ago

@Brad, Maybe you should buy your LEAF to flip it. But if you did, you would be risking not being able to sell it at a profit and you know that the market will be saturated with the cars in due course. To get the reward you need to take the risk and deal with the hassles. That's the free market; there's nothing morally reprehensible about doing so.

You also would miss out on driving it after you sold it. Whether that would be worth it is a personal decision. If you think so, have at it!

· Samie (not verified) · 1 year ago

For some reason most here don't get it. Using words like capitalism or free market in this case is false. What is free about a constricted EV market? We should carefully separate personal opportunistic adventures from actual car dealers who deal in mass quantity. For some re-read Adam Smiths Wealth of Nations, please....

Before you can judge what constitutes gauging, you need to talk about the barriers or "constraints" within the markets that restrict real free trade.

· Samie (not verified) · 1 year ago

Ok maybe I was too harsh above but let me give you an example of what I was talking about. The same incentive to "gouge" could be an opportunity for another dealer (say in another state) or say an actual auto manufacture to seize on their competition & exploit inflated prices by selling more vehicles at lower prices. Unless there is mutual cohesion in a free market, consumers would pick the best car dealer based on price & other preferences. Again reduced barriers to trade can counteract the motivation to "gouge".

· Paul Neuhausen, MSCIS (not verified) · 1 year ago

O.K. - here is my "idea": let the dealers who were selling SUVs five years ago and now trying to "cash" in on selling the "GREEN" cars let the cars sit in their lots for a year or two. Instead, simply find a less than 6,000lb. car to convert (from a junk yard or other source) and save a lot of money - like $20K! I am converting my 1997 GEO Prizm with the help of some EV associates and I should be paying less than $5K - not to bad for a car that will get a second life as an EV! The United States has so many used cars (at least a ten year supply), many of which can be converted to EVs - why buy brand new? Many experts agree that you should always buy a used car - why are EVs any different? Besides, you will be supporting the cottage EV conversion industry who are more "dedicated" to the "cause" than conventional producers who ar doing it for their own version of "GREEN": ($$$$$$$$$).

· Anonymous (not verified) · 1 year ago

Europeans Suffer as 2011 Nissan Leaf MSRP Rises to $50,310
http://www.allcarselectric.com/blog/1055781_europeans-suffer-as-2011-nis...

· Mike Moore (not the film maker) (not verified) · 1 year ago

Early adopters are going to pay more. That should be understood.
I suggest that those who want an EV, wait a while if the price is too steep now. Instead get solar panels on your house (like we did) and enjoy the "free" electricity. I am converting all my household appliances to electric and will buy a fully electric car within four years. As all the manufacturers compete, the prices will go way down and the product will be improved.

· JJ - from Canada (not verified) · 1 year ago

Nice photo of the Leaf. Good idea to make it a 4 door hatchback.
Very practical for more people.

· Anonymous (not verified) · 41 weeks ago

I was hoping to get a Leaf here in the Washington DC area. I was on waiting list for over a year. FInally got a green light and the Nissan dealer in Frederick Maryland wants $6000 over MSRP. Guess I'll get the deposit back and just continue waiting...

· Brad Berman · 41 weeks ago

@Anon - This price reporting tool might be helpful:
http://www.plugincars.com/nissan-leaf/price

If you can, please report the details about the Frederick dealership so others will know. Thanks.

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Nissan Dealers Join Chevy in Price Gouging for Electric Cars

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