GM Voids Warranties As In-Demand Vehicles Are Getting Resold By Dealers: Should Tesla Do The Same?

General Motors Company GM has initiated a new program to help stop its hottest models from getting flipped for high prices, Fox Business reported.

What Happened: Due to supply-chain issues causing supply to decrease, it has been very difficult for consumers to purchase in-demand cars such as the GMC Hummer EV. Therefore, in-demand cars are being resold by unauthorized dealers for record-high prices. For example, the initial value of the Hummer EV is $112,595, but several cars have been resold for more than $250,000 with one selling recently for $324,500.

GM has noticed that while many cars are extremely low in supply, only the higher-end models are being flipped. 

The car manufacturer will soon be launching its high-performance Chevrolet Corvette Z06 at $106,395 and the Cadillac Escalade-V at $149,900 and wants to get in front of this problem.

GM North America President Steve Carlisle shared in a letter to dealers that the transfer of certain warranties will be voided if the vehicle is resold within 12 months of delivery: “When vehicles are quickly resold, particularly by unauthorized dealers or other resellers that do not adhere to GM’s standards, the customer experience suffers and GM’s brands are damaged." 

The letter also stated that dealers will be limited in the number of reservations and orders allowed for in-demand vehicles.

Since many legacy dealers such as GMC, Cadillac and Chevrolet are franchise-based corporations, state franchise laws don’t allow for the central corporation — in this case GM — to mandate how much a dealer can charge for a car. On the contrary, newer brands such as Tesla Inc TSLA sell their vehicles direct-to-consumer and are entirely in control of pricing.

A GM spokesperson shared with Fox Business that bumper-to-bumper, powertrain/electric vehicle propulsion, sheet metal, tire and accessory coverage will be voided for the Hummer EV, Corvette Z06 and Cadillac Escalade-V. The battery warranty on the Hummer EV will remain intact and any recall work will still be covered by GM.

GM recognized this could be very upsetting to customers, so according to the Fox Business, it is offering buyers of the Corvette Z06 $5,000 worth of MyChevrolet rewards points which can be used to pay for accessories and service if an owner has the car for at least one year.

Photo: GM Hummer EV, courtesy of GM