Price Fixing Among Dealerships?

[EVO-V]

Why is it that prices for cars in this market seem rather fixed?

It normally doesn't matter which dealership you go to, everyone will have the same price for a particular car model. The concern here is with regards to consumer welfare.

Car prices, even if taxes are factored, are unusually high for the trim and spec we get here.

Isn't price fixing illegal?

[istan]

I think because the margins in selling cars are so small that its irrelevant. Casa's make money w/ servicing your cars.

[EVO-V]

I don't think that margins are that small. And even if it were, shouldn't the market be more competitive?

There's something less objective when you have someone having interests in a Nissan/Hyundai/Ford/Mazda dealerships.

[niky]

Who's to say the dealerships can't set their own pricing? "Price fixing" is only an issue for basic commodities. For consumer products, you can't declare that Sony and Samsung sell their LED TVs at the same price as some no-name Chinese brand.

Each dealership is part of a dealership network, which sets the maximum price they can sell the cars for. The difference between dealerships is in the discounts and freebies they give, which are taken out of the dealership's part of the margin.

They need to maintain a high margin if they can, because that margin goes towards paying the sales staff commission, the dealership lease/electricity/capital, the distributor/manufacturer and government taxes, which, unless you have a car produced in the ASEAN, are huge.

Our taxes here are much bigger than in the US, so there's no comparison there. The closest comparison in terms of tax levels would be the UK, though theirs are higher.

Notice how much vehicles cost through gray market distributors. They don't have to maintain full service garages, maintenance equipment, computer systems, manuals and parts supplies, so they can undercut the official dealers. But their prices are still "high." The need to maintain service equipment for all cars sold is why Nissan only imported a few 350Zs. What is the point in bringing in tens of millions of pesos of equipment to supply dozens of dealership garages, as well as millions in training for their personnel if you're only going to sell a few dozen 350Zs, no matter how many you import? A gray market importer doesn't have to care about that. Some grays are big enough to carry their own equipment (but they only supply one garage, as opposed to "official" distributors) while others are run by car enthusiasts who don't mind the cost (GT-R importers).

As to why some brands are much more expensive or much cheaper than the competition, it's all in how their costs are structured. Subaru/MotorImage and HARI (Hyundai) are particularly good at this, but you'll note that gray market Hyundai distributors can still undercut HARI.

If you want "cheap" cars, don't look at list prices. All dealerships HAVE to have the same list price. It's mandated by the distributor. Instead, ask about freebies and discounts, which are not listed.

If you want really cheap cars, you've got to go live where the cars are made, or... move to a country where taxes on cars are insanely low, like the US. But you'll find, in the US, that dealerships there are pretty unscrupulous, and will charge you a lot extra for a car ("market adjustment") if it's popular or new.

Our car prices are not exceptionally high by global standards. Singapore and Vietnam have much higher taxes, Malaysia once had an ultra-punitive tax on all non-Malaysian cars. All of Europe has high car taxes. Japan has high car taxes and inspection costs. The US is the odd one out in that it has cheap car taxes and cheap gas.

[111prez]

for reference, this is what constitutes unfair or unconscionable sales act or practice under the consumer code:

"Art. 52. Unfair or Unconscionable Sales Act or Practice. - An unfair or unconscionable sales act or practice by a seller or supplier in connection with a consumer transaction violates this Chapter whether it occurs before, during or after the consumer transaction. An act or practice shall be deemed unfair or unconscionable whenever the producer, manufacturer, distributor, supplier or seller, by taking advantage of the consumer's physical or mental infirmity, ignorance, illiteracy, lack of time or the general conditions of the environment or surroundings, induces the consumer to enter into a sales or lease transaction grossly inimical to the interests of the consumer or grossly one-sided in favor of the producer, manufacturer, distributor, supplier or seller.

In determining whether an act or practice is unfair and unconscionable, the following circumstances shall be considered:

(a) that the producer, manufacturer, distributor, supplier or seller took advantage of the inability of the consumer to reasonably protect his interest because of his inability to understand the language of an agreement, or similar factors;

(b) that when the consumer transaction was entered into, the price grossly exceeded the price at which similar products or services were readily obtainable in similar transaction by like consumers;

(c) that when the consumer transaction was entered into, the consumer was unable to receive a substantial benefit from the subject of the transaction;

(d) that when the consumer was entered into, the seller or supplier was aware that there was no reasonable probability or payment of the obligation in full by the consumer; and

(e) that the transaction that the seller or supplier induced the consumer to enter into was excessively one-sided in favor of the seller or supplier."

if you can make a case that "price fixing" falls under any of the above, then you can sue

unfortunately, we do not have, as of now, any antitrust laws on the matter

the other legal provisions are anti-monopolies or restraint of trade laws which i doubt any of the "price fixing" dealers are liable for

[dr. d]

there is only one official local supplier of toyota in the philippines, one of mitsubishi, one of nissan, etc etc.
i can easily imagine why prices are fixed.. because they ARE fixed. by the local manufacturer.
it is an open secret, that only the manufacturer knows just how much the car really costs to manufacture. everything else is profit in some form.. for the manufacturer, the dealer, the salesperson..
and because the filipino car buyer is a wise buyer, dealers cannot afford to price their goods too far from each other. otherwise, the buyer will flock to the one who offers the best price. can you imagine, makati buyers will all go to pampanga because the dealer there sells cars fifty thousand kesos cheaper than the other dealers... (example lang! heh heh.)
(i was informed by someone, that the manufacturers do have a policy of not allowing dealers to sell their cars at "irregular prices".)

[jedi]

its true, susundin talaga kung ano ang SRP, pailalim na lang ang lakaran sa discount... dapat magaling mag haggle at humingi ng freebies

there is only one official local supplier of toyota in the philippines, one of mitsubishi, one of nissan, etc etc.
i can easily imagine why prices are fixed.. because they ARE fixed. by the local manufacturer.
it is an open secret, that only the manufacturer knows just how much the car really costs to manufacture. everything else is profit in some form.. for the manufacturer, the dealer, the salesperson..
and because the filipino car buyer is a wise buyer, dealers cannot afford to price their goods too far from each other. otherwise, the buyer will flock to the one who offers the best price. can you imagine, makati buyers will all go to pampanga because the dealer there sells cars fifty thousand kesos cheaper than the other dealers... (example lang! heh heh.)
(i was informed by someone, that the manufacturers do have a policy of not allowing dealers to sell their cars at "irregular prices".)

[EVO-V]

There is one manufacturer but multiple dealerships. There's a distinction between the two positions in the supply chain.

Secondly who's to say that vehicles are not commodities?

Third, you'd be surprised, niky, how price fixing actually happens in the electronics market. Read up on it and you'd see how big name flatscreen manufacturers have been fined by the FTC and their executives jailed.

Car sales and maintenance service are two different business activities, let's not muddle this discussion because car owners have the right to choose where they want to have their vehicles serviced.

Just the same, we seem to be missing a crucial point. In the absence of anti-trust legislation(?), the detriment of consumer welfare is imminent. Because if it is about transparency, then we should be aware of ALL FREEBIES and INCENTIVES provided for each sale.

The problem here is pretty much the same, if you get a quote from one dealer, the other will match it, but you would see only how equally far each dealership will go to get your business. Meaning, all dealerships have practically the same mandate on discounts, incentives, and freebies.

More often than not, if you would look at some of those low downpayment schemes which they claim to finance internally and run the numbers, you could very well get a better deal from a bank.

So if the measure of consumer welfare is maximizing their purchase, then dealerships and their agents obviously fail to do so and clearly prey on the ignorance of their customers to maximize their margins.