The Hidden Costs Driving Up Car Prices
The Hidden Costs Driving Up Car Prices
Car prices in the United States have risen dramatically over the past two decades, and while inflation and new technology explain part of the increase, documented legal cases reveal a deeper problem: collusion and structural inefficiencies in the automotive industry. From supplier price-fixing to restrictive dealer laws, these factors have imposed measurable costs on consumers.
1. Supplier Cartels and Price Fixing
Multiple investigations by the U.S. Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), and the European Commission have uncovered widespread price-fixing among auto parts suppliers. These cartels directly affected the cost of components that go into every car.
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Wire Harnesses: In 2013, several Japanese suppliers, including Yazaki and Denso, pleaded guilty to price-fixing electrical systems that connect a vehicle’s components. Fines exceeded $740 million in the U.S. alone.
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Airbags: Takata and other suppliers colluded on pricing, leading to inflated costs for safety equipment. Executives from multiple companies served prison sentences.
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Bearings, Alternators, and Starters: Investigations in the U.S. and EU revealed coordinated price-fixing across these components, resulting in hundreds of millions in fines.
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Lighting Systems: Supplier cartels inflated the cost of headlights and other lighting components, confirmed by European Commission penalties.
The FBI described these cases as “one of the largest criminal antitrust investigations” in U.S. history, demonstrating that price-fixing in the supply chain was not isolated—it was systemic.
2. The Cost Impact of Supplier Collusion
While exact figures vary by case, the DOJ confirmed that price-fixing “directly impacted the cost of vehicles for manufacturers and consumers.” Automotive consulting firm analyses presented in court proceedings indicated that supplier cartels added thousands of dollars in inflated costs to the average vehicle by artificially raising the price of multiple components simultaneously.
3. The Takata Airbag Scandal
The Takata airbag crisis illustrates how corporate misconduct not only raised costs but endangered lives. Internal company documents showed that Takata knew its ammonium nitrate inflators could degrade and rupture, but the company concealed test data. At least 28 deaths and hundreds of injuries worldwide have been linked to exploding Takata airbags.
Automakers including Honda, Toyota, BMW, and Ford were also implicated for continuing to install Takata airbags even after evidence of defects emerged. The result was the largest automotive recall in history, covering more than 67 million airbags in the U.S. alone.
4. GM Ignition Switch Defect
Another documented case of cost-driven negligence involved General Motors. In 2014, GM admitted it had known for over a decade about defective ignition switches that could cause vehicles to stall, disabling power steering, brakes, and airbags. The defect was linked to at least 124 deaths.
Congressional investigations revealed internal GM documents showing the fix would have cost less than one dollar per vehicle. GM ultimately paid more than $2.5 billion in settlements and fines, but only after years of avoidable accidents.
5. Dealer Franchise Laws and Market Restrictions
In addition to supplier collusion, U.S. state franchise laws contribute to higher car prices. These laws, supported by dealer lobbying groups, prohibit most manufacturers from selling vehicles directly to consumers.
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Direct sales bans: Tesla and Rivian, for example, are barred from selling vehicles directly in many states, forcing consumers to purchase through third-party dealers or across state lines.
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Restrictions on dealer competition: Franchise laws often include territorial protections, which prevent one dealer from competing with another nearby dealer for the same brand. This reduces price competition and allows markups to persist.
The Federal Trade Commission (FTC) has publicly criticized these laws, stating in a 2015 report that they “harm consumers by restricting competition and raising prices.”
6. Regulatory Failures
Many of these problems have persisted because of regulatory capture: a pattern where regulatory agencies tasked with protecting consumers instead align with the industries they oversee.
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The National Highway Traffic Safety Administration (NHTSA) has been criticized for its slow response to both the GM ignition switch defect and the Takata airbag crisis.
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State legislatures have consistently upheld dealer franchise protections despite repeated calls for reform by economists and consumer advocacy groups.
Conclusion
The automotive industry has faced repeated, documented cases of price-fixing, safety negligence, and anti-competitive legal structures. These are not speculative claims—they are supported by criminal convictions, congressional hearings, and regulatory findings.
While it’s difficult to quantify the exact cost to consumers for each factor, the evidence is clear: structural inefficiencies and proven collusion have added billions of dollars in unnecessary costs to the price of vehicles, while also delaying innovation and, in some cases, endangering lives.
Until regulatory reforms address supplier cartels, dealer franchise laws, and enforcement gaps, these hidden costs will remain embedded in every car sold.
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