Exchange Rates and car prices

[Coaster]

Obviously car manufacturers have to take a long term approach to setting their prices in relation to exchange rates. However, do importers get the cars in at the exchange rate of the day? If this is the case, then importers are making a fair amount more than they used to. Some of this must be passed onto dealers?

Now please correct me in any and all of my musings as I'm the first to tell you I'm no boffin at this. So allow me to ramble forthwith:

Back when the Golf Mk6 was introduced in March 2009, the € was approx. 0.51 to AU$. So if the importer got a Mk6 for €15,300, that would equal AU$30,000. However, we are now trading at around 0.64 to the AU$, which equals about AU$24,000 for that same €15,300. AU$6,000 difference!

Add to this the 5% reduction in import duty and it seems that we should be getting a heck of a lot more for our money at the moment.

I'm not sure how all the money exchanges hands, but at the end of the day, someone is making a lot more money than used to, and it isn't being passed onto the consumer yet, maybe only marginally in dealer/customer negotiations.

[schoona]

We don't sell high enough volumes to warrant bringing the cost down. Shipping costs are higher. Staffing costs are the same for developed nations. Maintenance costs are higher. The actual car cost is higher. We get an LCT to prop up the local market...that's all I can think of atm...

[Rocket36]

Two words: IMPORT TARRIFS

[goodfella]

another two words:

CASH COW

[Coaster]

We don't sell high enough volumes to warrant bringing the cost down. Shipping costs are higher. Staffing costs are the same for developed nations. Maintenance costs are higher. The actual car cost is higher. We get an LCT to prop up the local market...that's all I can think of atm...

That's fine and understandable, but surely all those costs were taken into account when they were selling the car at €0.51 to the AU$. That still doesn't explain where this $6,000 has gone.

Also, the LCT is only for LC's.

[NickZ]

If they are selling enough at the current price, then why would they drop the price? Yes, exchange rates are a factor but unless there is a pressing need (competition, car out of favour of the market) to drop the price they will keep the higher price and make more money!

Look at the price of TVs - a much more price sensitive and competitive market and the prices have gone down in line with the appreciation in the A$ against the US$. Different market, different outcome.

Also, I would imagine dealers do not take on exchange rate risk (i.e. they pay a set price in A$ and VW Germany take on the exchange rate risk).

[VW Convert]

That's fine and understandable, but surely all those costs were taken into account when they were selling the car at €0.51 to the AU$. That still doesn't explain where this $6,000 has gone.

On the surface this would seem a logical argument however you overlook one very important factor. When the Aussie dollar fell out of bed from somewhere around .62 to .49, the raw cost increased by 26%, not to mention increased freight, duty etc, did VW suddenly whack their prices up? The answer of course is no, so it is swings and roundabouts.

Cheers

George

[Rocket36]

Also, the LCT is only for LC's.

Unfortunately Luxury Car Tax is not just for Luxury cars. Luxury Car Tax is payable at a rate of 5% for any amount over the threshold of $57123 (But only for the portion that is over the threshold. Everything up to $57123 only attracts the regular 3%). That means LCT applies to any car (new or used) that costs more than $57123 to buy. And there are MANY cars that meet that criteria that are NOT luxury cars.