Impact of OEM Requirements on MSRP Limits
1. Price Setting and Advertising Regulations
OEMs often set pricing guidelines or requirements for dealers about how MSRP can be presented and advertised. Recent regulatory changes, such as those implemented by the U.S. Federal Trade Commission (FTC) in 2024, have put restrictions on the use of MSRP-only advertising. Dealers must now include an “offering price” that reflects the final price consumers pay, including all mandatory add-ons and non-governmental fees. While dealers can still list the MSRP, it cannot be the sole price advertised. This means OEM-imposed MSRP limits must be transparent and coupled with the actual offering price to avoid consumer deception.
2. Ceiling Price Agreements
Some OEM agreements with dealers include maximum price (“ceiling”) restrictions to prevent dealers from charging above MSRP excessively. According to FTC guidance, such manufacturer-imposed maximum resale price agreements are assessed under a “rule of reason” approach—meaning they are evaluated for their competitive impact rather than being outright illegal. This prevents non-competitive overpricing while ensuring dealers provide retail services that justify pricing.
3. Compliance with Tax Credit Eligibility
OEMs must also consider MSRP limits in relation to compliance with federal incentive programs like the EV tax credit. For example, recent proposals and regulations tie eligibility for federal EV tax credits to vehicle MSRP caps (e.g., vehicles priced below $80,000). This influences OEMs to price certain vehicle variants strategically or even create configurations with fewer standard features to meet MSRP thresholds, thereby qualifying for tax credits, while still offering higher-priced versions. This regulatory MSRP cap can constrain how OEMs set MSRP, impacting product design and marketing strategies.
4. Influence of Market Demand and Supply Chain Regulations
While not directly tied to MSRP limits, OEM requirements related to pricing strategies are also influenced by supply chain demands and legislation, such as the Inflation Reduction Act which impacts sourcing and manufacturing costs. These factors indirectly influence MSRP ceilings set by OEMs to maintain competitiveness and regulatory compliance.
Summary
- OEMs influence MSRP limits both directly (via pricing policies and dealer agreements) and indirectly (through compliance with legal and regulatory requirements).
- Manufacturer requirements often mandate MSRP ceilings to maintain competitive, fair pricing at the dealer level.
- New FTC rules require MSRP to be supplemented with the final offering price in advertisements to prevent misleading consumers.
- Federal tax credit programs impose MSRP caps that OEMs must navigate when pricing EV models to ensure eligibility for customers.
- These intertwined requirements shape how OEM MSRP limits are set and enforced in the market.
Thus, OEM requirements act as a critical control point that shapes MSRP limits, balancing competitive pricing, regulatory compliance, consumer transparency, and market incentives.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-oem-requirements-impact-the-msrp-limits/
