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naraburns  nihil supernum  1yr ago (text post)   3452 thread views

Small-Scale Question Sunday for January 29, 2023

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

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Why aren't car manufacturers raising their prices? Prices for used cars have doubled and there is a shortage of new cars because prices are too low, causing ridiculously long waiting periods. Dealerships are reportedly trying to raise prices but manufacturers don't want them to. Why do the manufacturers care and why don't they just raise prices themselves and increase their profits?

They are increasing https://money.com/car-prices-ownership-costs-record-highs/

The average price of a new car reached an all-time high of $48,182 in July, according to Kelley Blue Book. That’s a 11.9% increase over the same month last year, and it too is significantly higher than the most recent overall inflation rate.

Yes, I know that dealers are raising prices, but why are they facing resistance from manufacturers and why are they not raising them by enough to keep the backlog of orders clear? Why are the manufacturers not taking advantage of the shortage by raising prices until the shortage disappears?

An order in backlog is better than an order that switches to a substitute good, namely a used vehicle. Besides which, Dealer Agreements often are in the form of a promise to buy X units at Y prices over 24 months or whatever, so may limit steep hikes.

From an economic actor standpoint, if I expect price hikes to be temporary, I'm gonna postpone my transaction. If I expect a slow but steady rise in prices, I'm gonna move it forward.

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