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Racing Teatray

Falling pound and rising prices...?

The future of car prices…??

Out of curiosity, I wondered how much a 440i GC to our chosen spec (£48k all-in) would cost today on the continent…

Germany: €68k (£60k at today's exchange rates of £1=€1.12)
Italy: €74k (admittedly an xDrive version as they don't do the sDrive version in Italy, but still…), which is £66k…

Now, a lot of that is due to the fact that a UK-spec BMW comes with a lot more as standard than its continental equivalents. However, at the previous year's end exchange (£1=€1.36), the spec-equalised German price nevertheless tracked pretty closely with €68k being equivalent to £50k, not far off £48k.

Makes you wonder how much car list prices will need to rise here in the months and years to come…
Nice Guy Eddie

The amount of volume the manufacturer expects the importers to shift means they'd be playing a dangerous game if prices went much higher. A mate of mine was the sales director for a local Mercedes group and his target across the dealerships was something like 15% year on year. You ain't getting that growth from 20% price hikes.

The real question is what the actual price or monthly payment the end user is really paying throughout Europe. U.K. Consumers seem happy to pay £500 a month to smoke around in a nice car. How we get to that figure be it high residuals, large discounts or heavy incentives doesn't really matter.
Michael

My finance lawyer brother-in-law agreed to be paid in US dollars just prior to the June 23rd vote. He's not complaining.
gonnabuildabuggy

Nice Guy Eddie wrote:
The amount of volume the manufacturer expects the importers to shift means they'd be playing a dangerous game if prices went much higher. A mate of mine was the sales director for a local Mercedes group and his target across the dealerships was something like 15% year on year. You ain't getting that growth from 20% price hikes.

The real question is what the actual price or monthly payment the end user is really paying throughout Europe. U.K. Consumers seem happy to pay £500 a month to smoke around in a nice car. How we get to that figure be it high residuals, large discounts or heavy incentives doesn't really matter.


I'd be interested to compare new car sales per head in other european countries.

I think here it's a volume game, but I'm sure prices will rise as the factories adjust capacity.
JohnC

I agree that we will see prices in the UK rise but nowhere near the movement in the £. The manufacturers will discount the cars a bit more and offer special finance rates to keep the monthly payments at reasonable levels.

However if inflation starts to creep in to the UK economy and wages start to increase again, I am sure that it won't be long before the prices start to increase as well. The prestige manufacturers have painted themselves in to a bit of a corner though because they have geared up to selling a large number of cars and unless they have a massive change of heart and go back to 1970's/80's volume they have no choice but to discount in the UK market.
Trade tariffs might be interesting!
Resident Spanner

Parts prices have certainly shot up even if cars haven't, a pair of rear dampers I was looking at have gone from ~£1600 to almost £2k.
JohnC

Resident Spanner wrote:
Parts prices have certainly shot up even if cars haven't, a pair of rear dampers I was looking at have gone from ~£1600 to almost £2k.


That will be because the parts come straight in from the Continent, so the fall in the value of the pound takes effect immediately when the supplier has to pay in Euros.

Anything that is a direct import will be impacted in this way.
Resident Spanner

Pity the old used ones didn't increase in value too!
gonnabuildabuggy

Resident Spanner wrote:
Pity the old used ones didn't increase in value too!


They will have if the sellers are savvy enough.
Frank Bullitt

JohnC wrote:
Trade tariffs might be interesting!


Indeed they will, and the news that CETA has been blocked by the Waloons should be a salient reminder to all those who scoffed that 'the Germans won't risk not being able to sell us their cars' were patently unaware of how trade deals Europe will be set up.

Over the next 2-3 years I think there will be a degree of protecting the UK market from this movement in order to keep sales similar to current levels, with a realisation this can't go on forever.

After this I think we will see a return to positions similar to the 70's and 80's, high-cost limited availability with increased value in each sale. I suspect this is also going to be true for mainstream brands and as a result, we will see higher prices across the board;; what I can't establish is whether we will suffer any increased cost for uk-made products from Nissan, MINI, Honda et-al, or rather, will manufacturers are penalised with exports requiring them to revalue the British business.

It seems the uk market takes about 10% of the German brands exports - not the largest by any stretch and as other markets become more valuable so ours will become less. Unless the UK parliament is willing to drop import quotas on cars, we are in for an expensive future.

If we accept the free movement of trade and people without the ability to form policy then the pound will (likely) strengthen again and all this will be immaterial.
Resident Spanner

gonnabuildabuggy wrote:
Resident Spanner wrote:
Pity the old used ones didn't increase in value too!


They will have if the sellers are savvy enough.


Limited market for 'em, they're race units.
Roadrunner

Nissan comits to future models at Sunderland:

http://www.bbc.co.uk/news/business-37787890
JohnC

Roadrunner wrote:
Nissan comits to future models at Sunderland:

http://www.bbc.co.uk/news/business-37787890


That's great news since I had feared the worst especially with the French being so involved.
Frank Bullitt

Roadrunner wrote:
Nissan comits to future models at Sunderland:

http://www.bbc.co.uk/news/business-37787890


"The support and assurances of the UK government enabled us to decide that the next-generation Qashqai and X-Trail will be produced at Sunderland," said Carlos Ghosn, Nissan's chief executive, saying he welcomed Prime Minister Theresa May's "commitment to the automotive industry in Britain".

Last month, he had warned that Nissan might not invest in the Sunderland plant unless the government guaranteed compensation for costs related to any new trade tariffs resulting from Brexit.


Looking forward to finding out what deal the car industry have to protect them from the effects of Brexit, whatever they turn out to be.
Michael

I think the bigger surprise is that both cars aren't already built in the same place as they look almost identical.
PG

It's great news that Nissan have made this commitment.

Frank Bullitt wrote:
Looking forward to finding out what deal the car industry have to protect them from the effects of Brexit, whatever they turn out to be.


There are several schools of thought on this. Ranging from we get that free trade deal. Through a deal is done on certain sectors - and automotive might (probably would) be one of them as the German industry will be pushing for that. To the fact that if we are under WTO rules, then outside the EU the UK could decide to give tax breaks to "exporters".

As we have a negative balance of payments with the EU, under WTO rules, the UK would get more cash from import duties than we pay to the EU to export there. Plus the saving on the EU budget contributions. So the UK could easily afford to subside our exporters.
Michael

There have been reports of slashing corporation tax but given both models do very well in global markets I'd guess the EU market wasn't particularly important anyway.
Frank Bullitt

PG wrote:
It's great news that Nissan have made this commitment.

Frank Bullitt wrote:
Looking forward to finding out what deal the car industry have to protect them from the effects of Brexit, whatever they turn out to be.


There are several schools of thought on this. Ranging from we get that free trade deal. Through a deal is done on certain sectors - and automotive might (probably would) be one of them as the German industry will be pushing for that. To the fact that if we are under WTO rules, then outside the EU the UK could decide to give tax breaks to "exporters".

As we have a negative balance of payments with the EU, under WTO rules, the UK would get more cash from import duties than we pay to the EU to export there. Plus the saving on the EU budget contributions. So the UK could easily afford to subside our exporters.


I get the machinations, what I'm interested in is the nature of the deal which the UK Government can commit to which essentially underwrites the impact of Brexit on the UK car manufacturing industry and therefore the likely impact to the UK taxpayer.

As for WTO rules, I doubt we will want to rely on it too much as it's an all-or-nothing deal, one which UK farming for example, may not be keen on.
Frank Bullitt

Looks like the uk motor trade has done its best to forward-buy;

http://www.bbc.co.uk/news/business-37795068

Old habits die hard
Nice Guy Eddie

It's not by choice, it's what the manufacturers push into the uk to keep volumes up knowing that the uk dealer network is bar far the best in Europe at handling over supply.

I do know a number of smaller groups have said enough is enough and have given up on volume bonuses and are now trying to make profit per unit.

It does all look rather unsustainable and you'd think would have a detrimental effect on residuals. I can only see the death of pcp and being replaced by PCH where the manufacturers don't have to publish any pricing apart from the monthly payments.
gonnabuildabuggy

Nice Guy Eddie wrote:
It's not by choice, it's what the manufacturers push into the uk to keep volumes up knowing that the uk dealer network is bar far the best in Europe at handling over supply.

I do know a number of smaller groups have said enough is enough and have given up on volume bonuses and are now trying to make profit per unit.

It does all look rather unsustainable and you'd think would have a detrimental effect on residuals. I can only see the death of pcp and being replaced by PCH where the manufacturers don't have to publish any pricing apart from the monthly payments.


My thoughts too.

With cars lasting longer than ever, and over supply against a likely dwindling demand then residuals are due a beating. Not helped by lack of local export opportunities.  

PCH/Lease will become the norm for new car purchases I'm sure.

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