If you are a franchised dealer in the following situation, do you necessarily want the gray market to cease to exist?A small-volume foreign auto maker limits the number of its franchised dealers in...

If you are a franchised dealer in the following situation, do you necessarily want the gray market to cease to exist?

A small-volume foreign auto maker limits the number of its franchised dealers in the US and gives them exclusive territories.  There are also non-dealers who have no official connection with the manufacturer. They buy its cars overseas and sell them in the US, a phenomenon sometimes called a "gray market." 

1 Answer | Add Yours

Top Answer

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

If you are the franchised dealer for this auto maker, you will not be likely to approve of the existence of a gray market.  The reason for this is that the existence of the gray market will probably cut into your sales.

It is possible that you might benefit from the gray market.  It is possible that people will see these cars (bought on the gray market), like them, and come to you as the authorized dealer.  In that way, the gray market could serve as a way to raise awareness of the brand of car you are selling.

However, if the gray market is relatively extensive, you will not benefit.  People will see the cars and like them, but they will not come to you to buy them.  Instead, they will go to the gray market dealers who are (quite legally) selling the cars for a lower price.

Thus, it is possible that a gray market could help you, but it is more likely that it will hurt you and you will therefore want it to cease to exist.

We’ve answered 318,929 questions. We can answer yours, too.

Ask a question