Monday, July 21, 2008
The European Car Companies Can't Afford to Sell Cars Here
Many of the European car companies are sending less of their cars to U.S. dealers because the U.S. dollar is worth so much less than the Euro. In Europe they can sell a car for a lot more money than they can here. A BMW 335i is $39,000 here, but in Germany it costs 41,500 Euros, or over $65,000. That makes it harder to get a car built in Europe right now. Some companies are choosing to build factories here. Volkswagen for example is about to build a new factory here. That will hopefully allow for more availability of cars like the new Jetta TDi, which our dealers are having trouble getting. The American Porsche dealers have a shortage of 911's and Porsche doesn't want to send 911's here from Germany. A 911 Carrera S in Germany would sell for around 100,000 Euros, or nearly $160,000, but here they sell around for $95,000. The dealer I was at this weekend is only going to get 4 or 5 2009 911's over the next 9 months. However, Porsche won't build a factory here. If the U.S. dollar doesn't improve versus the Euro all these companies will have to raise the prices of their cars in the US or there will continue to be fewer cars at the dealers.
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Interesting post as usual, MotorStreet. So let's see, the dealers get fewer cars from the factory (supply restricted) so prices rise (dealer profits rises, that is) assuming demand remains somewhat steady. Consumers get used to the new pricing and demand stabilizes. Since the price rises are at the dealer level there is still some flexibility in case demand wanes. Factory decides it is time to substantially raise it's pricing to a level in line with that which the consumers have come to accept. Supply is restored to previous levels and dealer profit shrinks back to normal levels.
I guess the question is whether demand for European cars is inelastic enough not to be effected by the price rises. Time will tell.
Or perhaps the the news stories and dealer reports are just FUD which aim to create a sense of scarcity among consumers. Consumers "sitting on the fence" given the current economic conditions might tip towards purchasing sooner avoid the "envitable price increases due to the weak dollar".
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