Think that you might be paying more for an import car recently compared to a domestic? You are most likely right. The American dollar's low value is contributing to one of the biggest price gaps ever recorded when comparing the average sales price of a European, Korean or Japanese car compared against one built in the United States.
Weak U.S. Dollar Makes Import Cars More Expensive Than Domestics
Automotive News is reporting that while the average import car price throughout the month of August was $31,536, that same figure for domestic automobiles was only $23,933 - a gap of $7,614. Now, this doesn't mean that prices for import cars have been jacked higher than their equivalent American models. What it actually reflects is the fact that fewer low-priced European and Asian cars have been showing up in U.S. showrooms as car companies struggle to turn a profit.
Low-buck subcompact and compact cars offering very thin margins, and in the face of inventory problems faced by automakers such as Toyota and Honda after the March earthquake and tsunami that significantly disrupted Japanese vehicle production, many brands affected by the crisis have elected to focus on higher end vehicles as a way of making up for lost revenues. Small inventories plus a weak dollar have created a selling environment where certain brands are no longer able to offer the same level of incentives as they had a year before, boosting the average price of each class of automobile sold.
Some Japanese car companies have adopted a long-term outlook that takes into account the danger of relying on unstable exchange rates to guarantee small car profits. Nissan is building new facilities and revamping old factories in Central and South America specifically to produce small cars in a more affordable context. Toyota, Honda and Volkswagen are also shifting more production to North America.
Another factor explaining the higher average cost for import cars towards the end of last summer had to do with the give and take of market share amongst foreign and domestic automobiles. General Motors and Ford, not facing any dramatic economic or logistical challenges to producing their entry-level automobiles, gained stronger footing. Import car sales were also tipped in favor of European premium brands such as Audi and BMW, which were able to claim a larger slice of the overall sales pie through their uninterrupted production capacity.
It is difficult to predict the constantly changing winds of global exchange rates, but it does seem safe to say that strong incentives on compact and subcompact Japanese cars will not be reappearing in the near future. This skittishness with regard to vehicle pricing will most likely be reflected across the lineups of many Asian automakers, providing even greater opportunity for domestic car companies to make in-roads with their value-oriented models.