And We Hurtle Towards An Obvious Conclusion To This Mess

http://www.wheels.ca/newsFeatures/article/31753

But a $2 billion (Canadian) class-action lawsuit launched yesterday alleges collusion between the Canadian and American head offices of some automakers to allegedly inflate the prices of cars in Canada while inhibiting cross-border shopping.

Hallelujah! The Canadian consumer isn't as stupid as they look!

So Honda- why is it that the built in Canada has that price discrepancy? Hey Toyota- fess up about the RX. GM- what about all those Oshawa cars?And I didn't forget about you Ford- what's up with the Edge and MKX?

Inquiring minds REALLY want to hear what the auto manufacturers have to say about this.

It's Starting To Hit The Fan

Almost a month ago, I wrote an article commenting on the growing disparity between Canadian and American car pricing as the Canadian dollar continued its climb to near parity with the US buck.

What's funny to me in reading that article was this part-

Even more amazing is that no one is doing or saying anything in Canada right now. No consumer groups have made a peep and no one is writing into their local newspaper griping about it.

Well, one month later, and the Canadian dollar is no longer at 95 cents US, it's now at par. The day I never thought I'd see has arrived, and over the last couple of days, the Canadian dollar has been more or less trading 1 for 1 with the greenback. Incredible.

And now, finally, major media in Canada is starting to take notice.

The lease deals seem even more unbelievable: Boston's Kelly Nissan offers a new Altima for $139 per month (with $2,723 due at signing) and a Pathfinder 4x4 for $239 monthly.

While priced in American dollars, the gap between the two currencies is closing, making the U.S. stickers especially appealing.

Yet it begs the question: with the loonie's rise against the U.S. currency, why aren't Canadians seeing lower automobile prices here?

Source- The Toronto Star, Wheels


Think the issue is going to go away? Think again. Most automakers (and representatives from other industries) are either sticking their heads in the sand on the issue, or making absolutely ridiculous statements that will only serve to bite them in the ass as time goes on. Some have gone off the record stating that Canadians were getting great deals back when the dollar was valued at 65 cents, so now it's only right that automakers milk parity for as long as they can. Others have done stupid things like cite the higher cost of operations in Canada. A country I should remind you, that has an open border with the United States, is part of a huge free trade agreement, where the majority of peole live 100 kilometers from the US/Canada border, and whose inhabitants largely speak the same language as the people of the United States outside of one province (well, two if you count Newfoundland). The excuses simply don't make sense. At all. And it's only going to get more infuriating as the Canadian dollar continues to climb. Some analysts are predicting it to rise to $1.10.

What then?

So I'm left to repeat what I said before- the first automaker to bite the bullet and stop skimming profits off of the Canadian consumer will have a homerun on their hands. My pick? Chrysler. Excess inventory, new management, low brand perception at present time- they're the perfect company to do it. Now they (or someone else) has to pull the trigger.

Canadians Are Getting The Shaft

Have you looked at car prices lately?

If you're an American, probably not too closely since all of your media and information is fairly insular and will always report the US pricing alone. Subcompact cars will run from 12k to 16k, compacts will nudge up to 21k, midsizers will range from 20k to 30k, and so forth. There are identifiable pricing segments, and there are identifiable ranges. Yes, inflation has moved pricing upwards, but at a fairly average pace.

If you're a Canadian however, and you've looked at car prices lately, you're probably slamming your head against your computer monitor as you read this. The reason? Car prices in Canada are ridiculously out of whack. Due to pricing differences predicated on a 60 to 70 cent Canadian dollar from 3-5 years ago, Canadian car prices have absolutely soared compared to their American counterparts- without moving up beyond usual inflation increases- all this is because if you haven't heard about it recently- the Canadian dollar is floating near 95 cents US...and climbing.

Parity between the bucks appears likely to happen, and every car maker is sitting back quietly raking in the profits.

Some examples?

Take the Honda S2000. In Canada, the pricing starts at approximately $51,000. A 70 cent dollar would give you an American price of about $35,000. However, with the dollar at the level it is, the American price should be closer to $49,000. Want to know the actual price of an S2000 in the US? $34,000. So for every S2000 sold near sticker in Canada right now, Honda is making an extra $15,000 Canadian. Without doing anything. Think about that for a second. If you adjust for the current dollar, the S2000 shouldn't be anywhere near $51,000 in Canada right now- it should be closer to $36,000.

Want another example? Let's go mainstream.

How about the Camry? The XLE V6 trim with navigation will cost a Canadian buyer a tad over $40,000. So you would expect that the same American car would cost about $37,000 US right? Wrong. A Camry XLE V6 with navigation in the US will cost at MOST $31,520. In essence, just by sitting pat and letting the markets move, Toyota is making an extra $6,000 per Camry sold in Canada. Think they don't want to increase their market share at these prices?

A final example? Let's play with a truck.

An extended cab Chevrolet Silverado LTZ 4WD with a regular box with cost a Canadian buyer a shade over $45,000 with no other options ticked off. The American version at current dollar levels should cost almost $43,000 US. Instead, US buyers can get the exact same vehicle in the US for about $34,500- a difference of $7,500 US. When you're selling as many Silverados as GM does, this is big money.

And it's not just the 3 examples above. Every single model of vehicle out there has this discrepancy built into it. Now, I'm not advocating that car manufacturers change their pricing structures on a month to month basis depending on the level of the dollar- but we're talking a more than 20 cent swing in the last 5 years, and not a single one has done anything to rectify the situation. Would a yearly evaluation help? Every 2 years? Even more amazing is that no one is doing or saying anything in Canada right now. No consumer groups have made a peep and no one is writing into their local newspaper griping about it. And yet it's plastered in front of us regularly if we read any information from an American source. Yes, there are some border dealers who specialize in importing American cars over, but really, this is a quiet 'epidemic' that is getting no play.

I guess the only question is- who will be the first to sacrifice some profit in order to make an artificial price play in the Canadian market? Or even more out there- who will be the first automaker in the US to RAISE prices to reflect the weakness of the greenback?