||06-22-2006 12:53 PM
Canadian cars more expensive than in U.S.(Globe & Mail)
Canadian cars more expensive than in U.S.
Auto makers have not adjusted their prices to reflect the strong Canadian dollar and the typical new vehicle now costs 17 per cent more in Canada than in the United States, according to a study by DesRosiers Automotive Consultants.
This differential — averaging $5,842 in Canadian-dollar terms — reverses a Canadian price advantage of $3,167 when the Toronto-based consultancy first studied the matter in 1999.
DesRosiers noted that the survey released today is based on listed manufacturers' suggested retail prices — not actual transaction prices after dickering and incentives, which could yield substantially different results.
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Analyst Dennis DesRosiers noted that the exchange rate — with the Canadian dollar near 90 cents US, up from about 67 cents in 1999 — has enabled auto makers to be aggressive with Canadian incentives.
However, "it appears that, to date, automakers have not adjusted their MSRPs to reflect our dollar's new-found strength, and Canadian vehicle buyers have not reaped the benefits resultant from a strong currency."
The study found the North American Big Three — General Motors (NYSE: GM), Ford (NYSE: F) and DaimlerChrysler (NYSE: DCX) — generally have much smaller Canada-U.S. price gaps than auto makers based abroad.
GM, Ford and Chrysler prices average $4,332 over American list prices for passenger cars and $3,639 for light trucks, compared with import-nameplate cross-border differences of $7,939 for cars and $6,432 for pickups, sport utility vehicles and minivans.
The study found General Motors has the closest parity between Canadian and U.S. prices, with a currency-adjusted differences typically less than 5 per cent outside the luxury segments.
Only five models surveyed were more affordable in Canada than in the United States: the Pontiac Montana SV6 minivan, the Chrysler PT Cruiser convertible, the Canadian-made Toyota Corolla and South Korea's Hyundai Elantra and Accent.
The Canada-U.S. price gap was generally smallest for compact and subcompact cars, and widest on high-priced models.
The Chevrolet Corvette and Lexus LS430, for example, "carry an astonishing 25 per cent Canadian-market differential."
The North American Big Three are pricing large pickup trucks almost identically in Canada and the U.S., but Japanese trucks are noticeably more expensive in Canada, with Toyota's Tundra carrying a 25 per cent differential.
The biggest single differential was for the Nissan Murano intermediate SUV, priced 26 per cent higher in Windsor, Ont., than in neighbouring Detroit.
DesRosiers sees five factors behind relatively high Canadian pricing:
List prices on minivans average 8 per cent higher in Canada, but DesRosiers said the prices actually paid probably align closely with U.S. values because minivans are "one of the most heavily incentivized segments."
- Prices in Canadian dollars remain flat.
- Stable prices "have a lot of merit. Drop prices too quickly and consumers will just wait for the next price decrease."
- The economy and the vehicle market are strong and manufacturers "can get away with these prices."
- Some foreign auto makers have most of their costs in home-market currencies, not U.S. dollars, and have little or no exchange-rate advantage.
- Profits in Canada "have been very lean for a long time."
Despite the general price disadvantage in Canada, DesRosiers doubts many individuals will brave the complexity of crossing the border to buy new vehicles, although dealers in late-model used cars may exploit the prospects for arbitrage.