The Nissan LEAF is the world’s first truly mass-market, affordable electric car and there are plenty of folks who’ve plunked down the $99 reservation fee with plans to be one of the first to own one when they start going on sale at the end of this year. But, from those intrepid early adopters, I constantly hear a deep-seated worry that dealers will try and squeeze some extra dollars out of them because of the incredible groundswell of demand.
Given the lack of clarity on the subject to this point, the worry is justifiable. After all, we saw it with the Prius back in the day, no? There must be something Nissan can do to stop dealer price gouging. Well, yes, yes there is.
So really, what’s there to stop a dealer? Nissan has said all along that they are going to take a hands off approach to dealer pricing. Legally Nissan can’t tell dealers how to price cars, they can only make suggestions — MSRP or “Manufacturers Suggested Retail Price” and all.
And the dealers seem to have the deck stacked in their favor on this one. At this point it’s clear that the LEAF will likely be supply constrained through at least the first year, and likely into the second. Nissan already has about 20,000 global reservations in the first 6 weeks of the reservation period with a whole 7 months left to go. They’ll only be able to make 50,000 of them a year until 2013, when plants other than the one in Japan come online. Clearly many dealers will be tempted to take advantage of that situation and gouge customers until they bleed.
But, as it turns out, there’s really no reason to worry. Earlier today I was at the groundbreaking of the Nissan LEAF battery plant in Smyrna, Tennessee, and had a chance to catch up with Mark Perry, Nissan’s director of product planning and strategy for North America. Among other things, he filled me in on why it is unlikely dealers will engage in price gouging.
According to Perry, there are major differences between a LEAF sale and a conventional car sale that should put to rest the question of price gouging. “The difference in the distribution process is, it’s not an allocation to the dealer, it’s a customer order, so [the customers] have the control,” said Perry on the sidelines of the groundbreaking event. As he explains it, if you go to any particular dealer and say ‘I have an order, would you like to deliver my lease?’ and they come back with a price $5,000 higher than list, you can simply take your order and go to another dealer. In this system, the people with multiple Nissan dealerships in their area will be at an advantage, but even the folks with only 2 or 3 within 60 miles will have excellent bargaining power.
This system is exactly what I had suspected and mused about in some comments sections on older posts. It’s an elegant way to solve the problem from the manufacturer end. There will still likely be dealers that try and price gouge, but all you’ve got to do as a customer is simply walk away from that dealer and take your order elsewhere. Plus, there’s always the onus of bad press to discourage dealers in the first place.
You can listen to this short portion of my conversation with Perry below.[audio:http://gas2.org/files/2010/05/LEAF_Dealer_Pricing_Mark_Perry.mp3|titles=LEAF_Dealer_Pricing_Mark_Perry]
Disclaimer: The author’s travel expenses and lodging were paid for by Nissan.