Why cars cost more here than in the US

csv8 · 12-02-2011, 10:31 AM

Why cars cost more here than in the US
By Neil Dowling12 February 2011

Our dollar is nearly level with the US but our cars cost much more...

AMERICANS pay about half of what we pay for new cars and we're not happy. It's not only the customer who's not happy - even the car distributors and dealers are spitting chips.

The enormous difference surfaced in the past few months when the Australian dollar reached parity with the US currency. Immediately we started asking why a Lexus LS460 costs an Australian a sizeable $191,200 - but an American pays $66,230.That's about a third of what we pay.

It's nothing to do with Lexus and the luxury brand isn't alone - all cars are cheaper in the US. We priced a Porsche Carrera S at $88,800 in the US - the same price as what we pay for a base-model diesel Land Cruiser GXL.But in Australia, the Porche costs us $282,800 - three times the US price.

As the words "rip off" resonate in our ears, we applied the same comparison to Mercedes-Benz and still we're looking at paying three times the price for luxury cars.

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Mercedes-Benz Australia spokesman David McCarthy says there are crucial differences between the two markets and that flows onto the retail prices.

"Basically, we pay more tax," he says. "There is GST, luxury-car tax and import tax on each car.

"That's the starting point. Australia is a tiny market - we have a one-million a year vehicle market, the US is about 30 million. You get a discount for buying in volume.

"Australia is a small market but it is geographically huge and needs similar levels of personnel and nationwide support and service as the US.

"Then we have specific emission and design regulations which Mercedes-Benz at the factory has to engineer and comply. We, Mercedes-Benz Australia, pays for that - not Mercedes in Germany. So that gets passed on to the customer.

"Our geographical isolation means we carry cars on shipping routes that aren't well travelled, so that costs extra. "The other important factor is model range. We sell everything from a Smart Fortwo to a 140-tonne truck and everything - cars, vans, trucks - in between.

"The US has a much smaller model range. For example, they have no four-cylinder engine versions available in the C-Class and E-Class and have no A-Class or B-Class models."

Porsche Australia spokesman Paul Ellis mirrors what McCarthy outlines. He says there's "about $100,000" in taxes in the Carrera S.

"The luxury-car tax is a high-end tax that's only applied to cars," he says. "It's not on yachts, jewellery or electronics - just cars - and I think that's because the government sees the car industry as a soft touch.

"The Australian Government imposes more taxes on luxury cars than any other economically established and mature market in the world."

Ellis says that's not all. He says that what we get in Australia is a far, far better product than the Americans. "In the US you basically get a cardboard box and steering wheel for your $88,800," he says. "Our cars have a much, much higher level of standard equipment."

McCarthy agrees saying the S-Class, for example, for Australia is the best-specced model in the world.

Ellis adds that buying power is a big contributor to the cheap US prices. "The US sells 30 times the number of Porsches we do," he says.

"So it can ask - and get - a better buying price from the factory. "Then there's market positioning. The 911 rivals are relatively more affordable in the US. You have to price your car in and around your competitors or you don't get on buyers' shopping lists."

The price differences also comes down to what people can afford. We did a check of average wages in Australia and compared them to the US.

Surprisingly, relative to the US wages, we are paid more. The average weekly earnings in Australia for 2010 was $56,950. In the US, it was $46,326.

More than 50 per cent of working Americans are paid less than $45,000 a year. "It's what people can or cannot afford to pay," says McCarthy. "It's interesting to note that the margins that we operate on - that is the profit to the dealer - is the same as other markets. So even though we pay three times more, the dealers are getting about the same."

Price differences

Honda Jazz 1.5
($A19,190) — $US15,100 (-21%)

Mini Cooper S
($A42,850) — $US22,300 (-48%)

Toyota Corolla Conquest
($A24,490) — $US16,520 (-33%)

Mazda3 Maxx Sport
($A26,320) — $US20,045 (-24%)

Toyota Prius
($A39,900) — $US21,650 (-46%)

Volkswagen Golf 103TDI
($A34,490) — $US23,885 (-31%)

Toyota Camry Sportivo
($A33,990) — $US23,590 (-31%)

Mazda6 Classic
($A31,750) — $US22,635 (-29%)

Subaru Liberty Premium wagon
($A40,990) — $US25,295 (-38%)

Honda Accord V6
($A49,990) — $US27,355 (-45%)

Mazda CX-9 Luxury
($A57,015) — $US32,445 (-43%)

Toyota Kluger KX-S
($A55,490) — $US34,750 (-37%)

Volvo XC60 T6
($A65,950) — $US38,400 (-42%)

BMW X5 35i
($A103,900) — $US46,300 (-55%)

Note: Some cars are built in the US. Specifications may not precisely equate.

**Dave R** · 12-02-2011, 10:38 AM

This has always bugged me, particularly the fact that you can get a new M3 over there for just $60k, in other words practically G6ET money.

Quote:

Originally Posted by Neil Dowling

Surprisingly, relative to the US wages, we are paid more. The average weekly earnings in Australia for 2010 was $56,950. In the US, it was $46,326.

I don't know anyone that earns $56,000 per week

Rodp · 12-02-2011, 10:53 AM

Quote:

Originally Posted by Adrenaline

I don't know anyone that earns $56,000 per week

Indeed. Time to ask for a payrise!

Jim Goose · 12-02-2011, 10:41 AM

Hmm.. the article seems to be aimed at luxury cars in price compareson for starters and has a go about the added taxes here in Australia. ONly at the end it adds a few small cars to compare with.

As it says in the article, Australia has a very limited market.
Our wages dont compare to the USA in many ways, also compare the average wage in the auto factories in the USA to what Australian workers get. The guys in the USA get paid peanuts.

There is no price comparison with the cost of living given so its only half the story.

And it spells it out quite clearly, our market is very small compared to the USA.
SO is the article a whinge about taxes??
Im not sure what its trying to say here apart from complaining about taxes on luxury cars?

Rodp · 12-02-2011, 10:54 AM

Look on the bright side.

Honda Jazz 1.5
($A19,190) - $SGD107,900 or ~A$84,000.

Yellow_Festiva · 12-02-2011, 06:52 PM

Quote:

Originally Posted by Rodp

Look on the bright side.

Honda Jazz 1.5
($A19,190) - $SGD107,900 or ~A$84,000.

Was just going to mention car prices in Singapore.

I started a thread many years ago the first time I was there. $100k for a Camry...

There is much, much more to car prices than exchange rates. We get some things good, they get some things good.

Having said that, I would have a new Mustang in the garage tomorrow if they were the same price here as in the US.

bobthebilda · 12-02-2011, 07:28 PM

Quote:

Originally Posted by Yellow_Festiva

Was just going to mention car prices in Singapore.

I started a thread many years ago the first time I was there. $100k for a Camry...
.

The Oz to singapore dollar is 1 to 1.28. So that does take of 28% of the prices differences. But the big difference is the "certificate of entitlement" you need to purchase with each car. Although it is only valid for 10 years, its is transferable within the 10 years (and someone cant buy a car without a COE), but you do get some "subsidies" (not sure what they are) when you have to export the car after the 10 year period.

Its akin to saying the japanese have to pay $500,000 for a corolla over there. The car might cost you $20,000 (not sure what they do cost) equivalent in oz dollar, but as you cant buy (or it might be rego) a car unless you can prove you have off street parking, then you might as well add the price of a house or apartment onto the price of the car.

With the populations and land sizes of these countries, every street would be like a Westfield parking lot, if they didnt put some very strict controls in place for car ownership.

Actually, I remember seeing an article the other day, that some chinese cities are now starting to restrict ownership (making it harder to buy) for the same reasons. Imagine 1.3 billions chinese with a car each, but no room on the roads to drive them.

vztrt · 13-02-2011, 07:59 PM

Quote:

Originally Posted by bobthebilda

The Oz to singapore dollar is 1 to 1.28. So that does take of 28% of the prices differences. But the big difference is the "certificate of entitlement" you need to purchase with each car. Although it is only valid for 10 years, its is transferable within the 10 years (and someone cant buy a car without a COE), but you do get some "subsidies" (not sure what they are) when you have to export the car after the 10 year period.

Certificate of entitlement (as we would know it is rego plates) prices have been curbed back. At one stage they were auctioning them off. Now your looking at between $10-15k depending on the size of the engine. But then after you buy the car you effectively are gonna pay another 300% tax on the price of the car.

At the end of the day it cheaper to use a taxi when you live over there.

But at least insurance is charged by a persons age.

bobthebilda · 12-02-2011, 11:06 AM

I think you need to look at certain aspects of the story, and think if that is so far out, does the author just make it up to get a story out

Quote:

"That's the starting point. Australia is a tiny market - we have a one-million a year vehicle market, the US is about 30 million. You get a discount for buying in volume.

Yeah we sell about a milllion here ech year, but the Americans highest ever was only about 16 million. Fell to about 8 or 9 million during GFC, and is currently only bobbing around the 11 million mark.

Then you need to compare what they have compared. Whilst we know our cars include all on raod costs, I dont beleive that the Americans MSRP does include any of these prices.

Whilst it might be difficult to explain a $100,000 difference in price, a 2 to $3000 difference in price can simply be explained by through put. Hire a 4000 car carrier (for 12 days at $30000 a day) from Japan to California and you end up with a market of 37 million people (in that state alone) . Hire a 4000 car carrier from japan to Australia (for 20 days @ $30000 a day), and you have to drop 900 in QLD, 1100 in NSW, 1000 in VIC, 400 in SA, 600 in perth. Repeat all this costs throughout the distribution process, and include sales/ promotion costs etc etc, and we are never going to get cars as cheap as the US. But some of the $15000 to $35000 cars are as close as one can expect them to be.

I guess our only option to get cars as cheap as the US is to import 290 million indians and chinese to live here. Its ironic that we want cheap cars, but we want to increase tariffs to stop imports to protect our own cars, but the only real answer is that we might just have to import the people who would otherwise be making the imported cars.

Riksta · 12-02-2011, 07:26 PM

Quote:

Originally Posted by bobthebilda

I guess our only option to get cars as cheap as the US is to import 290 million indians and chinese to live here.

Falcon sales would go through the roof as they make 290 million taxis for them to drive.

**ebxr8240** · 12-02-2011, 11:12 AM

Tax's in various forms make a difference also...

Franco Cozzo · 12-02-2011, 05:31 PM

Yeah, cardbox box $80,000 my fat sphincter, have a look at what Cadillac offers and for what prices. Their cars are loaded up to the hilt with all sorts of luxury features for barely any cost.

banarcus · 12-02-2011, 05:41 PM

You have to have a tax to support the huge welfare system we have in Australia. Whether it be subsidies or dole bludgers, there are many who hold out their upturned hats to the federal government.

fordv8! · 12-02-2011, 05:59 PM

Quote:

Originally Posted by banarcus

You have to have a tax to support the huge welfare system we have in Australia. Whether it be subsidies or dole bludgers, there are many who hold out their upturned hats to the federal government.

here here australia is a welfare state and its a joke it needs to change and we can all reap the benefits of lower taxes, it's way to easy to be a bludger in aus!

Franco Cozzo · 12-02-2011, 06:03 PM

Quote:

Originally Posted by fordv8!

here here australia is a welfare state and its a joke it needs to change and we can all reap the benefits of lower taxes, it's way to easy to be a bludger in aus!

Well when the dole pays more than a first year apprenticeship, why would you bother?

snappy · 13-02-2011, 08:39 PM

Quote:

Originally Posted by Big Damo

Well when the dole pays more than a first year apprenticeship, why would you bother?

I dont know maybe to learn , better your self and in 4 years times earn 5-20 times more then what the dole is paying

Franco Cozzo · 15-02-2011, 03:29 PM

Quote:

Originally Posted by snappy

I dont know maybe to learn , better your self and in 4 years times earn 5-20 times more then what the dole is paying

Of course, I was just making a snide remark.

Quote:

Originally Posted by Pedro

When I go to the USA I always take minimum clothes so I can stock up over there at usually half what I would pay here.
In 2008 I bought a high quality Sony digital camera at Wal-Mart for $340, six months before it was released on the OZ market at $600.
I was going to buy a USA map for my TomTom but it was $119 here. I bought a three model newer TomTom loaded with USA & Canada fot $129 at Wal-Mart.

All the USA prices I've quoted are converted to OZ dollars.

Thats right, I pick up new release PS3 games for about $55 USD including shipping from playasia.com, and they are legit retail copies. For example, it cost me $54 AUD to get Dead Space 2 here from there which costs $110 in EB Games.

Ohio XB · 12-02-2011, 06:14 PM

I thought the part about the 30 million unit sales in the US was a red flag too. One of the easiest figures he had to look up, auto market size, he blew by a multiple of 3!!!! Makes me wonder about everything else.

Wait!!!! You mean you Aussies are making much more than us UAW people? Well, we just have to start a mantra about the over paid auto workers of Oz, making even more than the greedy, dead beat UAW. Where is the outrage??

LOL, you know I am kidding.

You don't get a discount for buying in volume in the US. Whether a dealership buys 3 of a car or 300, the price is the same. They will advertise to make it sound like they got a great deal on their cars by saying "No one pays less for a new car than we do!" Well, that's right. No one pays more than them either.

There IS a discount for MAKING cars in volume. Everyone knows that as "economy of scale." 219,000 Fusions can be built cheaper per unit than 30,000 Falcons.

Quote:

"In the US you basically get a cardboard box and steering wheel for your $88,800,"

Are you serious? Are you kidding me?

Quote:

"The US has a much smaller model range. For example, they have no four-cylinder engine versions available in the C-Class and E-Class and have no A-Class or B-Class models."

A Mercedes with a 4 cylinder in the US is not what Mercedes is in the US. It is a luxury car with performance. To have one with a 4 cylinder would be the same as getting a Cadillac with a 4 cylinder. That's right, there are no 4 cylinder Cadillacs and that's an American car company. The Mercedes is not a utility car in the US.

Quote:

We priced a Porsche Carrera S at $88,800 in the US

This article was written this month, yet the starting price for the Carrera S at the Porsche USA website is $90,500. Not a big difference, but not accurate since the article was just done.

Quote:

"The other important factor is model range. We sell everything from a Smart Fortwo to a 140-tonne truck and everything - cars, vans, trucks - in between.

Really? Are you kidding me, again? We also sell the Smart Fortwo and and a 300 tonne truck, the world's largest, if he really wants to "compare size."

The US sold 25,320 Porsches last year.
http://ridestory.com/2011/01/07/pors...sales-in-2010/

That's out of about 12 million cars sold. Not a significant portion of the market. Anyone know how many Porsches sold in Oz?

Steve

drew`SEVNT5 · 14-02-2011, 12:05 AM

Quote:

Originally Posted by Ohio XB

Really? Are you kidding me, again? We also sell the Smart Fortwo and and a 300 tonne truck, the world's largest, if he really wants to "compare size."

Steve

Reading comprehension not your thing? That quote was from the M-Benz rep, about the range of product they sell outta Lexia Place... ie: What M-Benz sell.

Last I checked, CAT don't sell Smart Four2

mrbaxr6t · 14-02-2011, 08:18 AM

I remember when Porsches and the like attracted a luxury car "tax" this was at the time the reason for the price discrepancies, we were told under a GST luxury imported cars would become cheaper, a pot of beer wouldn't become more expensive and a packet of cigarettes wouldn't become more expensive now if I remember correctly luxury car prices didn't move, cost of a pot went up as did cigarettes, despite the plainly obvious nobody batted an eyelid.....

as long as we just accept being lied to by pollies they will keep doing it

Ohio XB · 14-02-2011, 02:01 PM

Quote:

Originally Posted by drew`SEVNT5

Reading comprehension not your thing? That quote was from the M-Benz rep, about the range of product they sell outta Lexia Place... ie: What M-Benz sell.

Last I checked, CAT don't sell Smart Four2

Actually my reading comprehension is quite stellar. The statement that I was responding to was where the Mercedes spokesman was commenting on the Australian car market as a whole. Here is an example of him speaking on the Australian auto market as a whole....

Quote:

"That's the starting point. Australia is a tiny market - we have a one-million a year vehicle market, the US is about 30 million. You get a discount for buying in volume.

Now is he saying that Mercedes sold 1 million autos in Australia in 2010? No. He says "we" as in "Australians." Actually Australia sold 1.035 million vehicles in 2010, which can easily be referred to as 1 million.

http://www.goauto.com.au/mellor/mell...25780F0012FFA9

So when he says "we" sell everything from the Smart Fortwo he is just naming the smallest vehicle sold in Australia (can you name one smaller?) up to the largest vehicle sold in Australia (140 tonne truck) and everything in between. I don't know why he would think we would not have such a range of vehicles available in the US. And the world's largest truck, twice what he quoted, is in the US.

Smart cars are not a Mercedes. Smart is a division of Daimler, not a division of Mercedes.

Quote:

Production began in 1998 in Hambach, France. That same year, smart became a 100% owned subsidiary of Daimler-Benz AG...........When Daimler announced in June 2006, that it was bringing the smart brand to the United States through a distributorship with the Penske Automotive Group, ...

Note that they are not even sold at Mercedes' dealerships in the US.

http://www.smartusa.com/smart-car-fortwo-company.aspx

I suppose we could say his statement could be taken both ways.

Anyway, this is the same guy who said the US market was 30 million vehicles when it is only around 12 million, so since he blew such a simple statistic to reference I don't have a lot of confidence in the rest of what he said.

Steve

irlewy86 · 15-02-2011, 03:03 PM

Quote:

Originally Posted by Ohio XB

Actually my reading comprehension is quite stellar. The statement that I was responding to was where the Mercedes spokesman was commenting on the Australian car market as a whole. Here is an example of him speaking on the Australian auto market as a whole....

Now is he saying that Mercedes sold 1 million autos in Australia in 2010? No. He says "we" as in "Australians." Actually Australia sold 1.035 million vehicles in 2010, which can easily be referred to as 1 million.

So when he says "we" sell everything from the Smart Fortwo he is just naming the smallest vehicle sold in Australia (can you name one smaller?) up to the largest vehicle sold in Australia (140 tonne truck) and everything in between. I don't know why he would think we would not have such a range of vehicles available in the US. And the world's largest truck, twice what he quoted, is in the US.

Smart cars are not a Mercedes. Smart is a division of Daimler, not a division of Mercedes.

Note that they are not even sold at Mercedes' dealerships in the US.

I suppose we could say his statement could be taken both ways.

Anyway, this is the same guy who said the US market was 30 million vehicles when it is only around 12 million, so since he blew such a simple statistic to reference I don't have a lot of confidence in the rest of what he said.

Steve

I think when Mercedes says "140t truck" is referring to their prime mover that can pull 140t. So he was referring to his range as in city car to commercial, I thought the sub-text of that is he was getting a bit ****y with the interviewer.

Smart dealerships are usually integrated with Mercedes dealers here in Aus. Mini and BMW are the same, they have the different badges but pretty much apart of the parent. Unlike say Ford/Mazda or GMH/Suzuki who are almost totally separate. Link for Mercedes Aus http://www.mbaup.com.au/

From memory Mercedes said last year Australia was MB's fourth most important market. I don't remember of that was in terms of sale volume or gross profit.

As for the effect of the dollar on tourism... very bad in some parts of the country.

outback_ute · 17-02-2011, 09:05 AM

Quote:

Originally Posted by Ohio XB

So when he says "we" sell everything from the Smart Fortwo he is just naming the smallest vehicle sold in Australia (can you name one smaller?) up to the largest vehicle sold in Australia (140 tonne truck) and everything in between. I don't know why he would think we would not have such a range of vehicles available in the US. And the world's largest truck, twice what he quoted, is in the US.

Smart cars are not a Mercedes. Smart is a division of Daimler, not a division of Mercedes.

M-B Australia do sell that range in Australia, with the 140 tonne truck being a road-going vehicle, not off-highway. Not sure how that makes the cars cost more though - if there wasn't a return on an individual product, eg Smarts or 140 tonne trucks, why would they want to sell them here in Oz? Nobody is forcing them to.

fitzwa I'd say classic car price differences are influenced by supply and price of non-classic cars. Eg you can't buy a new Mustang at a sensible price, or a 2-10yo one cheaply, as an alternative to a 64-70 Mustang out here. Not to mention the number of old Mustangs in the states would still be a lot higher than here despite importers best efforts.

irlewy86 · 15-02-2011, 02:37 PM

Quote:

Originally Posted by drew`SEVNT5

Reading comprehension not your thing? That quote was from the M-Benz rep, about the range of product they sell outta Lexia Place... ie: What M-Benz sell.

Last I checked, CAT don't sell Smart Four2

Isn't that a Leakybear (German)?

XRATE-UTERUS · 12-02-2011, 07:22 PM

wages over there are alot less as well then ours. so there isnt much differance when you ask the yanks.

In Focus · 12-02-2011, 07:45 PM

Re: the Porsche Carrera price. Perhaps the $88k was Oz dollars rather than US?

Re: 1.3 billion Chinese cars. Not just the room on the roads - imagine the greenhouse gases.

XRtowcar · 12-02-2011, 10:08 PM

What really gets me is a Pontiac G8 selling for US $31750 and an SS Commodore is AU $44990.
"Go Figure"

snappy · 13-02-2011, 08:46 PM

The other thing to consider to is porches were 88k here i would imagine there would be alot more on the road

aussie muscle · 14-02-2011, 09:13 AM

Quote:

Surprisingly, relative to the US wages, we are paid more.

So he's saying BECAUSE we earn more we HAVE to pay more for cars. yeah... that's fair. exchange rate and shipping should be the ONLY reason cars are more expensive here.

Maybe Australia could start allowing LHD cars for a start, then we might see prices start to fall if we don't have to build cars especially for our roads.

Ohio XB · 14-02-2011, 02:09 PM

Quote:

Originally Posted by aussie muscle

So he's saying BECAUSE we earn more we HAVE to pay more for cars. yeah... that's fair. exchange rate and shipping should be the ONLY reason cars are more expensive here.

Maybe Australia could start allowing LHD cars for a start, then we might see prices start to fall if we don't have to build cars especially for our roads.

I don't think he is accurate in saying, well much of what he said, but there is a business rule called "Whatever the market will bear." That means to sell something at a higher and higher price until sales are negatively impacted, then the price is reduced to the last highest price in which sales were not negativelty impacted. That is the price at which consumers are willing to pay for something for maximum profit for the sales entity. It is the highest price the market will bear. Perhaps this is a contributing factor to prices of cars in Australia?

Steve