Thinking about buying that midlife crisis Boxster? Better get on with it. Citing the dollar's weakness against the euro, the Wall Street Journal predicts that the price of cars imported from the Eurozone will rise over the next year. So far, European automakers have been able to hold the line on price using currency hedging, which "lock in" exchange rates. Unfortunately for German car lovers, the contracts are due to expire. BMW and Mercedes will probably continue to rely on their US-built products to fill the profit gap, and hope the situation reverses itself. VW says they're fully hedged for 2007 and "more or less fully hedged for 2008." After that, it's anyone's guess what they'll do: build factories in the US, turn to China for production and/or raise prices. Porsche? Audi? Price hikes. Jaguar? The sooner it's someone else's problem, the better Ford's gonna feel.
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Hmmm, it sounds like GM should be shipping US built Saturns to Europe as Opels instead of sending European Opels to the US as Saturns!
Oooh, I had a ’79 Rabbit just like the one in the photo. Same color and all, built in the PA factory. Just none of the tacky accessories.
I had a 78 model, it was just like driving a golf cart. I sold it after just 6 months.
It would seem that most european manufacturers are “hedged” for the better part of 2008. Considering how competitive it will be till the end of 2007, which manufacturer would raise prices?
From the article most European manufacturers raised prices by appreciable levels with the launch of new models. Are they really in such dire straits?
Demand is it what it is. No matter what happens to exchange rates, they can’t charge more than the market will bear.
I suspect that you’ll find lease deals that are structured in such a way so as to get around this issue. That’s what BMW is already doing, their US business model is built around selling many of their vehicles twice (firstly, as a lease; secondly, as a CPO’d used car.)
As my house decreases in value and out-of-the-country vacations become financially unattainable, I really hope the domestic automakers play this economic fiasco to their advantage; it might be their last chance.
I had a 1980 Rabbit, with a Diesel engine. Assembled in PA. Ran for 135,000 miles until I traded it in on a GTI in 1986. The Rabbit was gutless but frugal… but somehow I managed to rack up two speeding tickets in it, one of them was even a Federal Offense… go figure. Oh yeah, that was back in the days of 55.
–chuck
http://chuck.goolsbee.org
If most Volkswagens for the US market are built in Puebla, Mexico (which pays workers in Pesos, and presumably pays for natural gas, steel, rubber, cast iron, etc. in Pesos too) why would Volkswagen have to hedge the Euro against the Dollar? Though I presume the Peso (like just about every other currency) is gaining in value vs. the US Dollar…. perhaps not as quickly as the Euro, does anyone have those figures?
It would be highly ironic if Volkswagen (and Audi?) had to build a plant in the US again, to maintain their competitiveness in the US market, instead of importing cars from MEXICO, or am I the only one to see the irony there?
Of course, I’ve been watching jobs departing from Michigan for Mexico for about a decade…. so my viewpoint is probably skewed a bit.
If VW do build cars here, could they possibly see fit to do a non-2.8, and actually crack open one of Deming’s books, to learn something about making the product right the first time? VW “quality” is an oxymoron compared to Toyota, Honda, Mazda, Subaru, even half baked Nissan, Mitsubishi and Suzuki.
I’m pretty sure the only VWs we get now from the Puebla plant are the Jetta and Beetle. Everything else comes from Germany, including the Rabbit.
It would be a lifestyle change for many of us if OPEC decides to one day switch to EURO’s for pricing oil. Or China drops its dollar reserves in exchange for the EURO.
With the dollar’s weakness, wouldn’t Japanese and Korean car prices also go up? This can be good news for the domestic manufacturers…but then they have to move their production back to the US.
That’s right, it’s just the Jetta and Beetle that are built in Mexico (at least what we get). The Passat, Eos, Touraeg, and the Gabbit/Rolf are built in Europe. Maybe this is why there’s a new article saying VW may build diesel engines in the US. http://tinyurl.com/29ad6p
“Gabbit/Rolf”
Hey, cool model names, better than the alphabet soup ones we’re stuck with all too often today!
R32, I’m looking at you.
Hmmm…maybe I should start thinking about ordering/putting a deposit on a Jetta Sportwagen TDI?
People are always bemoaning the fact that Ford’s best product, like the Focus, is reserved for Europe, while Americans languish with older, lower quality models.
And Ford’s response has always been that it is too expensive to sell the Euro Focus (et al) in the US market.
But what Ford doesn’t realize is that by standardizing product globally, it gives itself a chance to lower costs radically by exporting from low cost countries to high cost countries.
Ford NA would be in great shape now if they could export excess capacity to Europe, rather than stuffing the US fleet channels.
Hope this doesn’t screw up my plans to replace my Mustang GT with a C30, Cooper S, or GTI DSG when gas prices get too painful.
i would think the dollar depreciation would affect the lexus and infiniti models built in japan as well as the euro cars. should be advantageous for the CPO market AND might send a few folks over to their caddie dealer. whoduthunk it!
qa wrote: “It would be a lifestyle change for many of us if OPEC decides to one day switch to EURO’s for pricing oil. Or China drops its dollar reserves in exchange for the EURO.”
A lifestyle change? Oh yeah. If OPEC prices oil in Euros, the U.S. would have to convert to Euros to buy crude. That would increase the price of gas dramatically. And if China cashed in her trillions of dollars for Euros, the dollar would plummet. That would essentially tank our economy, by leading to hyper-inflation.
That is one of the problems with an economic policy based on a weak currency. If we were self-sufficient, and produced our own clothes, shoes, pots and pans, TVs, cars, and food; it wouldn’t hurt as much.
My advice is to hedge against the dollar by investing in international funds. That is what most large U.S. businesses do.
And, if you can afford to do it, sell your home and rent or lease. The housing market still has a long way to go down.
I predict this will continue until we disengage from the war in Iraq. Like the old U.S.S.R., we will find ourselves economically depleted by an endless, unwinnable war.
On the bright side, public reaction to our economic plight might lead to regime change here at home.
I doubt the falling dollar will affect Japanese makers too much, or, at least, the Japanese companies who have plants in the US. The majority of the main line stuff (Camcords, Civics, Corollas etc) are made in the US. In fact, did the Japanese build plants in the US to protect themselves from dollar fluctuations in one of their main markets? The models which are made in Japan are usually the low profitable lines (sports models etc). Anyway, the Japanese supposedly have an artificially low currency value, too.
Oh hang on, When the US Dollar falls it’s the depressed market, when Japanese yen is low it’s “artificial”…….
Quite right, Katie! I also was reading yesterday about how some people here are whinging and whining and pointing fingers at the Chinese, the Russians, the Venezuelans and the Iranians for “causing” the economic fiasco here in the US (and also the rest of the world, by default) – calling it “economic cold-warfare”.
Horsefeathers. OK, sure, I suppose it might be somewhat feasible that all of the US’s enemies are “ganging up on it” economically, but only if they wanted to kill the goose that lays the golden eggs…. it’s not like China has a lot of other places to dump their cheap shoddy merchandise, other than here…. and if the US economy tanks into a depression, OPEC will see oil prices down in the $15 per barrel range again…
But I strongly suspect by living for 1/2 century and watching humanity, that the fault of the US economy faltering right now is easily laid at the feet of several of the usual suspects. Pride. Covenousness. Envy. Gluttony (which is more than just about food). That’s four out of seven.
According to “tradition” the 7 Deadly Sins are;
Pride
Lust
Anger
Covetousness
Envy
Sloth
Gluttony
And, According to the Bible, the 7 things the Lord hates are:
Proverbs 6:16-19
“There are six things the LORD hates, seven that are detestable to Him:
haughty eyes,
a lying tongue,
hands that shed innocent blood,
a heart that devises wicked schemes,
feet that are quick to rush into evil,
a false witness who pours out lies
and a man who stirs up dissension among brothers.”
You know, things that affect 100% of all humanity, no matter where they live.