Cars, the great currency ripoff?

• 

  tonyjzx on 01/04/2012 - 13:17

  +3

  selling cars in this country has significant barriers of entry

  your car must pass local ADR - this cost is born by the importer (Toyota AU, BMW AU)

  when Toyota have to buy 1,000 Corollas they have to finance this

  they also have to compete with other RHD markets for stock… that means Toyota HK, ZA, JP and UK… obviously this is seperate from any LHD markets with a different cost structure

  also you may be forced to buy in certain tranches… ie. BMW must buy 50 x 3 series, 10 x 5 series, and 5 x 7 series

  problem is they can sell all the BMW 3s they get but they can't sell any 7s… so basically the 3 series must subsidise the 7s which are leased out at a loss

  to be fair I notice there's a lot of models that are cost competitive…

  eg. Hyundai Accent is $17k in the US, it's $21k here for the same model - that is a fair price diffence… also the Holden Cruze, Ford Focus and basically most of the cheap Koreans

  however as you go up things get crazy… a BMW 335 is $42k in the US and $110k here

  obviously this is all about volume and basically what the market will bear

  when volume comes in it, it affects price and servicing

  i've been thru the sums to setup a dealership and it is very very expensive so you can see why things get even worse when you talk long term ownership

  i think prices are pretty fair up to $40-$50k here… its when you get to the more luxury cars then its bad

  lastly the local car industry is extremely powerful… they have continued to successful lobby to make it extremely hard to import enthusiast vehicles… and to protect basically four or five models? (Falcon Territory/Commode/Cruze/Camry) - for this we can't easily import japanese turbo sports cars?

• 

  savit on 01/04/2012 - 14:10

  Good comment tonyjzx. Thank you.

  AU market/customers have proved to bear these prices. And it is not just about imported stuff. I doubt that
  anyone is interested in selling volumes in AU. Just usual oligopoly market.

  Just wondering what would happen if US$42k BMW 335 would be offered on Ozbargain. Would be gone like HP Touchpads.

  • 

    GaryQ on 02/04/2012 - 11:30

    I would want free shipping on that Beemer!

• 

  [Deactivated] on 01/04/2012 - 18:22

  Tony

  Agree with what you say about costs here, but why havent they lowered the price after they have had reduced currency costs. I'm not concerned about our standard uplifts, that you have adequately explained in very helpful detail.

  This is a product they bought in A$ 20-30% higher 3 years ago, but we never see any reduction, even a measly 10% in the price. Can you explain that one for me.

  Hell people have kittens if someone like Apple charges 5% over US prices, we even get Senators demanding retribution, but on a 20K car we hear nothing.

  And yes not all the cost of a car is the import price as you say, so even if we take 50% raw cost and 50% local costs , we should have seen some reduction - ie at least 10%

• 

  tonyjzx on 01/04/2012 - 19:45

  because currency changes are a very small part of the cost component… and it gets worse (obviously) as you get in to the luxury class

  i would agree that there's some of the "frog in the boiling water" thing with currency changes… but think like this… maybe 15 yrs ago we bought a standard family car that cost under $30,000 and the currency was 75c?

  now if we want to buy the same equivalent family car, its still $30,000 and the currency is $1.05?

  comparing to TVs, currency costs are a large part of the cost component so you see some major changes

• 

  mini2 on 02/04/2012 - 10:41

  Currency cost are all planned well ahead of schedule much like the production cycle so anything drastic that might happen (Thai flooding, Japan tsunami) will only impact the future. On the flipside, a better AUD won't filter through till much later but if the AUD tanks big time like back into 60 cents then price rise will be imminent but not immediately.

  Works both ways.

  EDIT: just come to think of it, some cars have gotten cheaper over time. Take a WRX for example, back in 1994 it was $39990 and today it's still $39990 with a lot more stuff added but at the same time take CPI into consideration then the real price of it has dropped a fair bit.

• 

  tonyjzx on 02/04/2012 - 10:49

  natural disasters usually have little affect on price outside of dealer 'adjustments' due to limited stock

  i'll give you a good example

  you can buy a popular car for say $20k

  i know for a fact one of the rental companies has bought 1,000 cars (for example)

  basically the car company is servicing this demand first ahead of customers

  if you bought one expect no discounts and expect long delivery times

  and that's it… that's the sum affect of tight supply! probably having something to do with strong competition and an ordinary product hence the inability to ask for a premium

  if it was a BMW…

• 

  Magnate on 02/04/2012 - 13:51

  A lot of companies will lock in their forward exchange rates to protect against risk in currency fluctuations, often up to years in advance. So as mini2 said it takes time for changes in currency fluctuations to flow through into the retail market.

  Also, the imported cost of the car only make up a proportion of the total cost of the car, the rest is made up of import costs, taxes, distribution, sales, dealer profit etc.

  • 

    [Deactivated] on 02/04/2012 - 16:36

    -1

    I accept that totally, but locking in an exchange rate for 3 years in the case of the example I quoted seems a little long, especially as the longer the lock in the higher the charge..

    Will be interesting to see what happens when the chinese cars start arriving in volume. I think we might just see some "currency" benefit then from those companies who have "locked" in the rate

    • 

      mini2 on 06/04/2012 - 09:20

      Some of the cost can be attributed to ADR's - some of them are unique to us meaning the manufacturer or importer has to accommodate for that in often pretty low volume. Obviously the fixed costs are there with lesser volume of cars that they can shift meaning the extra overhead to be slapped on top of each cars sold. Even if the US do come up with requirements like that but there's a larger cost base for it to spread out with.

      Another point is that the testing evidence that the manufacturers or importers obtained from overseas testing to prove their ADR compliant worthiness often are made redundant here meaning they will have to carry out similar tests which have been done overseas simply because our rule doesn't accept those here. More testing = more money burnt = added to the car's selling price. In their defence, they've finally get on with times and accepted more overseas evidence ie JS/DOT mark.

• 

  _Bruce_ on 03/04/2012 - 09:08

  I think a lot of it is driven by comparison cost to local cars, in particular Toyota have local and imported cars and their first goal will be to have the prices across the range make sense. This is hardly anything new, options and badge packs have always worked like this, it is about creating a range in the market, then adjusting the whole range rather than pricing each car/component on it's costs.

• 

  gibspmuh on 04/04/2012 - 16:33

  Certainly I know looking at the Mazda 2 that I bought two years ago compared to now the price has come down a couple of thousand dollars for the same model (and includes the safety pack as standard now instead of as an optional extra which I had to buy).

  Part of that was the shift of manufacturing from Japan to Thailand and I guess both the cheaper labour costs and the tarrif reduction as well as stated above. But I'd guess some must be related to currency movements as well (and the competition on price in that end of the market).

  • 

    tonyjzx on 04/04/2012 - 17:29

    some of that is currency however a lot is just stronger competition from the Koreans

    it used to be a stripper model had nothing in it

    the Koreans changed that by making even base models well appointed… so the Japanese had to react…

    eg. we have the base model Nissan SUV and for $30k its great value… it has everything you want

• 

  ultraskool on 06/04/2012 - 07:54

  -1

  The koreans make crappy cars like Hyundai, Daewoo, Kia… Just to name a few.