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Demand for Volt leads to extreme dealer markups

LOS ANGELES — Car sales may be in a slump, but the hybrid-electric Chevrolet Volts are hot, and that's leading to shortages — and in some cases extreme dealer markups.

Several dealerships have priced new Volts more than $20,000 above General Motors' suggested $41,000 retail tag. Others are selling the vehicles as used, claiming a $7,500 tax credit for themselves and leaving the eventual buyers ineligible.

And there's not much GM or regulators can do about it.

"We want our dealers to be transparent about the whole sales process," Volt spokesman Rob Peterson said. "But they are independent franchises. They can set their own prices."

High fuel prices have increased demand for the vehicle, which can get 93 mpg-equivalent on battery power and 37 mpg on gasoline. GM's decision to gradually roll out the vehicle a few states at a time is also causing a supply crunch. The automaker expects to produce only about 10,000 Volts this year, rising to 45,000 next year.

Town & Country Chevrolet in Milwaukie, Ore., is asking $51,999 for a 2011 Volt — "pre-owned" with less than 100 miles — because local demand is high, a dealership manager said.

Glendale Hyundai in Glendale, Calif., has four used Volts, all with low mileage, priced at $44,995 in what might seem like a bargain compared with some other dealers' prices. But customers interested in the vehicles, which were bought at auction from a used-car dealer, will not be eligible for the $7,500 federal credit, according to a salesman who declined to give his full name.

Mark Modica, an investigator for the watchdog group National Legal and Policy Center, said dealerships are buying Volts from other dealers, claiming first title to qualify for the incentive, and then reselling the vehicles at inflated prices.

Dealers are legally allowed to title a car to themselves and thus qualify for the credit, though they have to pay a use tax, according to the California DMV.

GM's Peterson called the notion of dealers gaming the tax credit an "exaggerated claim" because no customers have complained.

Dealers that are planning to claim the Volt tax credit for themselves are not likely to hide the fact from potential buyers, said Bill Visnic, senior analyst with Edmunds.com.

Passing off the vehicles as new would be "a fairly overt act of deception," he said — "basically fraud."

"The idea is to prey on the desperation of people who want to buy the car," he said. "It has all these conspiracy elements. But most people will know exactly what they're entitled to, so it's hard to imagine that this is going to be much of a widespread problem."

To avoid accusations of price-gouging and a potential consumer backlash, some major chains, such as AutoNation, which operates in the Tampa Bay area as AutoWay, are asking their Chevrolet dealers not to charge a premium on the Volt.

"There was a lot of hand-wringing about it early on — that it was just a question of how much over MSRP dealers were going to go," Visnic said.

Demand for Volt leads to extreme dealer markups 06/03/11 [Last modified: Friday, June 3, 2011 9:16pm]
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