PT Cruiser prices padded
April 28, 2000: 1:17 p.m. ET
Many top dealers charging over list for hot car despite company urgings
By Staff Writer Chris Isidore
NEW YORK (CNNfn) - Despite the stated desire of DaimlerChrysler officials that dealers hold down prices for the hot Chrysler PT Cruiser, dealers and fans of the car are reporting widespread pricing above list price.|
Dealers say the opportunity to make some extra money is too great for many in a business where margins normally are very tight.
"I've sold Grand Cherokees at $50 over cost. We're losing money selling new cars today. Some dealers see the PT Cruiser as a way to level the playing field," said Carlos Planas, owner of Tamiami Chrysler Jeep in Miami, who is a director of the Chrysler dealer association for South Florida.
Planas said he's sold some PT Cruisers at list price, and even given one away to a charity. But he's also selling some for above list.
Two Web sites started by fans of the car -- www.ptenthusiasts.org and www.ptcruiserclub.org -- polled visitors and found about a third of dealers are seeking above list price, and about half want only list price. The dealers who are seeking above list anger the car's fans.
"I think the dealers don't understand what they're doing to their image," said Scott Kissinger, founder of the ptenthusiasts site. "The amount of extra profit they're going to make is more than made up in the ill will they generate."
DaimlerChrysler officials echo Kissinger's comments that above list price sales are a bad idea for the long term, but while they say they have urged dealers to keep the prices of the car low, they say they can't force the dealers under laws and regulations that control the relationship between dealer and manufacturer.
"Smart dealers know this is not a short-term product, not a low volume vehicle where there will always be a short supply," said Dominick Infante, a spokesman for the company. "We've had complaints, and we've been very pro-active to try to prevent pricing issues. The zone manager will call them and talk to that dealer when we find out about it."
Infante and other company officials say they are taking extra steps to address pricing with the "Five Star" dealers, those the company recognizes as its best, with benefits such as referral of Internet sales inquiries.
But the dealers say this is a simple case of supply and demand setting prices.
"I don't know of a single Five Star dealer who hasn't taken advantage of the situation," said Buck Buchanan, fleet manager and head of Internet sales for Falore Chrysler in Sunnyvale, Calif. Falore, a Five Star dealer, is selling for as much as $5,000 over list. "Buyers have to step up to the plate if they want the car right now."
And despite Chrysler statements, Buchanan and Planas, who also is a Five Star dealer, said they are not receiving any pressure from the manufacturer to keep prices at list.
"They can not dictate price," Buchanan said. "I went to a meeting three weeks ago with a (DaimlerChrysler) rep and a dealer asked 'How much should we price this at?' He responded, 'I don't want to hear any discussion of pricing.' That would be like price fixing, and it's blatantly illegal."
Infante said Buchanan is mistaken, that there is no legal prohibition on manufacturers urging dealers to stick to list price, and that DaimlerChrysler will continue to do so.
Premium prices not expected to last
One of the attractions of the vehicle is a list price of around $20,000, depending on options. The PT Cruiser is a hybrid of a small car and a minivan, and that keeps DaimlerChrysler from setting the list price significantly higher to try to capture more of the profits itself, said David Cole, director of the office for the study of automotive transportation at the University of Michigan.
"In a small vehicle, pricing is a pretty dicey type of thing," Cole said. He expects the premium pricing will disappear as production increases, no matter how hot the car is.
"I think that's a fairly early-on phenomenon," he said. "You have the people who have to have the first one on the block, but the average person who buys it won't be paying a premium."
Infante said production of the car is expected to double in May to 600 a day from 300 currently, and that the company should be making 1,000 a day by August. The company plans to make about 120,000 PT Cruisers this year, reaching the 180,000 capacity at its Toluca, Mexico, plant in 2001. Next summer should also see the start of production of up to 50,000 a year in Graz, Austria.
Dealers have had the cars since late March, but the first sales report won't be available until next week, when April sales are released. Some smaller dealers say they are basically being locked out of the car for perhaps this entire year due to limited supply and strong demand from the metro dealers.
"They group dealers by size or sales volume. Our rep told me she had 19 dealers in her district and they had 134 sold orders, and but zero allocation," said Bruce Fitzgerald, business manager of Ray's Ford Mercury Chrysler Plymouth Dodge Jeep in Brandenburg, Ky., a town of about 2,500 people. He was charging only list price, but he stopped taking orders after the first five in February because he couldn't promise delivery.
"It's nice to have a product with that much demand, but it'd be nicer to actually have them," he said.
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