Weak Sterling effect on UK Porsche values?

[tracydeedance]

Obviously the banks building societies don't want our money any more there's no incentive to save with many isa around 1 per cent

[RSVP911]

Adam B said:

I totally get your point, but some might argue we might switch to local equivalents, or put off some luxury purchases (which tend to be foreign imports, eg cars. clothes or handbags/jewellery)

That will be very tough in the case of clothing (and impossible in respect of electronic goods) , there is very little now made in the UK and most clothing is priced in $'s and a smaller amount in €'s -prices are definitely going up no matter what retailers are saying.I guess whatever happens, non discretionary spending will by its very nature, still happen ; Food, Petrol, Gas ,Electricity - all of which will cost significantly more. People may still want thier "right" of an annual trip to the sun - that is going to really hurt with the £ where it is - both of these things mean that there will be little left for non discretionary "stuff". So you are right people will do without, which is fine as these purchases by their very nature are not essential - problem is, the economy works by churning money around as as such, we'll have a cycle of :

Significant Inflation (bought about by the weaker £) coupled with ;
Loss of margin to business as they can't pass the whole exchange rate loss on to consumers in the forms of excessive price increases
Leading to : Less disposable income after the non discretionary stuff : leading to a ....
Sales reduction (at lower margins)

Then :

Businesses go bust and hey ho, straight back into recession - just brilliant !

All self inflicted and totally unnecessary - what a waste !

Keep smiling

[nickfrog]

Wrong, you forgot the Marmite export effect.

[nw942]

RSVP911 said:

That will be very tough in the case of clothing (and impossible in respect of electronic goods) , there is very little now made in the UK and most clothing is priced in $'s and a smaller amount in €'s -prices are definitely going up no matter what retailers are saying.I guess whatever happens, non discretionary spending will by its very nature, still happen ; Food, Petrol, Gas ,Electricity - all of which will cost significantly more. People may still want thier "right" of an annual trip to the sun - that is going to really hurt with the £ where it is - both of these things mean that there will be little left for non discretionary "stuff". So you are right people will do without, which is fine as these purchases by their very nature are not essential - problem is, the economy works by churning money around as as such, we'll have a cycle of :

Significant Inflation (bought about by the weaker £) coupled with ;
Loss of margin to business as they can't pass the whole exchange rate loss on to consumers in the forms of excessive price increases
Leading to : Less disposable income after the non discretionary stuff : leading to a ....
Sales reduction (at lower margins)

Then :

Businesses go bust and hey ho, straight back into recession - just brilliant !

All self inflicted and totally unnecessary - what a waste !

Keep smiling

So the govermnment steps in and borrows to invest to help absorb some of the pain.

[RSVP911]

woollyjoe said:

2015 was a good year for companies selling to UK, so I am hoping minimal price increases yoy whilst the market develops.

If they sell in $'s , prices have just gone up 20% . Either the supplier , the retailer or the customer takes (or shares) the hit - simple as that I'm afraid

[RSVP911]

nw942 said:

So the govermnment steps in and borrows to invest to help absorb some of the pain.

Ok , so taxes go up to fund this - taking more disposable income out of the economy - however you look at it we are going to be economically worse off - don't take my word for it - this is what everyone thinks as demonstrated by the currency crash

[RSVP911]

nickfrog said:

Wrong, you forgot the Marmite export effect.

[IMI A]

Its worth noting that Sterling may not stay weak against Euro.

If govts change in Germany and France to more anti immigration focussed parties who also want to withdraw from EEC the Euro will tank and I think this scenario is reasonably likely.

Similarly if Mr Trump miraculously pulls off a win in US elections can you imagine what will happen to the dollar. Give it 12-18 months....

[mollytherocker]

IMI A said:

Its worth noting that Sterling may not stay weak against Euro.

If govts change in Germany and France to more anti immigration focussed parties who also want to withdraw from EEC the Euro will tank and I think this scenario is reasonably likely.

Similarly if Mr Trump miraculously pulls off a win in US elections can you imagine what will happen to the dollar. Give it 12-18 months....

More instability and uncertainty! Who can predict the economic or political machinations of the next 10 years?

[SRT Hellcat]

Merkel is happy to be swallowing debt in an attempt to keep the euro week. Current forces are working against her. In truth the so called experts have not a clue what to do next. Buy what you like the look of that will bring a smile to your face and enjoy. Life is far too short to be second guessing the conundrums of idiots

[dmm1983]

Currency is just one aspect. We also need prolonged affordability through disposable income which is a concern as inflation creeps up. Zero interest rates are propping up and inflating perceived affordability in my opinion.

[RSVP911]

woollyjoe said:

Sorry, I don't get all of what you are saying.

I don't believe the whole ticket price of the car gets converted back to Euro as they have an operation here that has costs too - Porsche is the exclusive importer in the UK.
Porsche's profits get hit one way or another with currency exchanges all the time, and it hasn't materially impacted pricing strategy changes historically.
The pound is similarly low to 2009 to 2011 and 2013; as said 2015 was a high, so whilst 20% is a nice headline, it is theoretical based upon the highest vs the lowest - not the median.

You could argue that it makes it a great time for the Porsche to expand it's operation in the UK whilst the currency is good. More showrooms to offset profit creation and therefore currency conversions. Invest in Silverstone even!

We should all take a breath and worry about marmite prices staying put.

Hi there - my point wasn't Porsche specific - just a general point that anything purchased in $'s where hedges haven't been taken will cost roughly 20 % more yr on yr. Hedges will offset part of this but they will run out over time and at some point this inflation has to come though somewhere - either in prices or supplier / retailer reduced margin. You are completely right though, my comment was very simplistic - some of an items cost will not be $ driven and as such the 20% will be lower - my bad. But you get the gist - if a large % of an items cost is denominated in $'s then prices will rise or margins will erode - or both.

[mollytherocker]

I am unconcerned about marmite prices as I have a YEARS SUPPLY!

Er... 1 jar.

[Cabsi]

nickfrog said:

Phooey said:

I can see Porsche eventually (2018 I would guess) putting prices up to reflect currencies

January 17 is my guess.

Agree with early 2017. Wouldn't be surprised to see their main GBP hedge running out at the start of 2017. May be why they've been pulling forward the production of UK Mecan GTS slots into 2016.

Will be interesting to see if they take advantage of the strong Euro to invest in their UK infrastructure...

[dmm1983]

Out of curiosity, what's the logic behind Porsche wanting to plough cash into UK infrastructure? Euro is strong, yes, but if the outlook for the UK is less than rosey and we are facing potential price rises in new cars, presumably there will be fewer buyers for a reasonable period of time. Unless the UK economy booms and wage growth grows, I don't see how Porsche would get a worthy return on their investment? They will continue to be seen as a top brand and people who can afford them will buy, but I would assume in fewer numbers in a smaller (RHD) market. Europe is a large market remember.

[RSVP911]

dmm1983 said:

Out of curiosity, what's the logic behind Porsche wanting to plough cash into UK infrastructure? Euro is strong, yes, but if the outlook for the UK is less than rosey and we are facing potential price rises in new cars, presumably there will be fewer buyers for a reasonable period of time. Unless the UK economy booms and wage growth grows, I don't see how Porsche would get a worthy return on their investment? They will continue to be seen as a top brand and people who can afford them will buy, but I would assume in fewer numbers in a smaller (RHD) market. Europe is a large market remember.

I suppose it would be a long term investment - a punt, I guess. Significantly less €'a needed to build X in the U.K. now . Invest today for less and hope sales return when currency reverses / pending financial st storm finishes.

[Cheib]

Don't really see what there is for Porsche to invest in! They already have the PEC and most dealerships are franchises owned by the big dealer groups.

Porsche GB own the five SE dealers but in the case of Hatfield its massive already and Mayfair might be quite expensive to expand!

I do know both a few OPC's are expanding though.

[ChrisW.]

IMI A said:

Its worth noting that Sterling may not stay weak against Euro.

If govts change in Germany and France to more anti immigration focussed parties who also want to withdraw from EEC the Euro will tank and I think this scenario is reasonably likely.

Similarly if Mr Trump miraculously pulls off a win in US elections can you imagine what will happen to the dollar. Give it 12-18 months....

The problem for Sterling is the balance of payments deficit (europe is hedged by 27 countries --- Germany is a manufacturing powerhouse benefiting from the averaged euro exchange rate that combined gives it a very large balance of payments surplus). Remember, the UK starts from a low base of domestic manufacturing making it a challenge to benefit quickly from the low £.

We are now importing inflation --- anything that we do not manufacture is costing us at least 20% more and who for a moment thinks that any company has the free margins to absorb this ?

So either prices go up or costs must be cut --- inflation versus unemployment.

The government has said that they will allow inflation to run to protect the economy, but will salaries follow ? If salaries do we gradually lose our low £ advantage --- if salaries don't consumers will have to buy less (which some would argue is not a bad thing ...).

In the meantime lots of people are being auto enrolled into new pensions that will cost employers 1, 2 and 3% over the first three successive years --- and the employee 1, 3 and 5% as their share (if anybody can really afford to do it). This is the percentage of gross income, so for employers and employees being auto enrolled within three years the percentage of total salaries skimmed off the consumer economy will be 8%. Will employers increase salaries to balance this ? Will salaries also be supplemented by inflationary pressures ? If salaries do increase we gradually lose our low £ advantage --- if salaries don't consumers will have to buy less (which some would argue is not a bad thing ...) !.

It will be very interesting to see if our government (of whichever colour) will be able to offset the risks attached to the above --- with the additional self determination (control ?) that Brexit in theory provides ?

I mean by that, --- how for example have we in the past limited the free movement of people from outside the UK ? This was not influenced either way by our membership of the EU, --- did we do it well ? Yes in theory there are some from the EU that we don't wish to be obliged to accept but --- would we achieve this even if we could ?

Maybe Boris or Nigel would care to enlarge on this by demonstrating the reality of their argument, rather than labouring their so far worthless words .... of course in my humble opinion ...

[ChrisW.]

P.S. Porsche in Germany could hold prices by supplying at US equivalent prices --- but UK prices would then be well below other European prices --- would they allow that ? If not, uK prices of new cars will have to increase --- which would tend to increase the value of secondhand vehicles subject to the result of supply / demand.

If people start to feel poor and / or interest rates do rise to protect the £ and / or to fund the balance of payments deficit, the current borrowing surge that is funding current retail sales growth could reverse.

At which point, what happens to demand ?

The other side of this is that those who have money who's pension contributions have been capped, will still look for somewhere to find a reasonable return on something that they can also enjoy. Unless they prefer the security of cash with increasing interest rates ...hoping to offset inflation.

Left had drive cars that started in Europe and could therefore easily go back to Europe, are of course a hedge ...

IF we Brexit, we really do tip ourselves into a World in which we become a very small player with very modest resources. Will our youngsters really be willing to work as hard and as well as it takes to deal with all these influences ?

And if we are to stay would the EU ever really be able to reach trade deals when 28 countries cannot agree on the shape of bananas ?
(Canadian trade deal at risk after 7 years of negotiate due to Walloony concern over competition from Canadian meat ? I wonder how they will be paid off ....)

QED --- don't worry, be happy Choose what you want and pay for it !

[RSVP911]

ChrisW. said:

The problem for Sterling is the balance of payments deficit (europe is hedged by 27 countries --- Germany is a manufacturing powerhouse benefiting from the averaged euro exchange rate that combined gives it a very large balance of payments surplus). Remember, the UK starts from a low base of domestic manufacturing making it a challenge to benefit quickly from the low £.

We are now importing inflation --- anything that we do not manufacture is costing us at least 20% more and who for a moment thinks that any company has the free margins to absorb this ?

So either prices go up or costs must be cut --- inflation versus unemployment.

The government has said that they will allow inflation to run to protect the economy, but will salaries follow ? If salaries do we gradually lose our low £ advantage --- if salaries don't consumers will have to buy less (which some would argue is not a bad thing ...).

In the meantime lots of people are being auto enrolled into new pensions that will cost employers 1, 2 and 3% over the first three successive years --- and the employee 1, 3 and 5% as their share (if anybody can really afford to do it). This is the percentage of gross income, so for employers and employees being auto enrolled within three years the percentage of total salaries skimmed off the consumer economy will be 8%. Will employers increase salaries to balance this ? Will salaries also be supplemented by inflationary pressures ? If salaries do increase we gradually lose our low £ advantage --- if salaries don't consumers will have to buy less (which some would argue is not a bad thing ...) !.

It will be very interesting to see if our government (of whichever colour) will be able to offset the risks attached to the above --- with the additional self determination (control ?) that Brexit in theory provides ?

I mean by that, --- how for example have we in the past limited the free movement of people from outside the UK ? This was not influenced either way by our membership of the EU, --- did we do it well ? Yes in theory there are some from the EU that we don't wish to be obliged to accept but --- would we achieve this even if we could ?

Maybe Boris or Nigel would care to enlarge on this by demonstrating the reality of their argument, rather than labouring their so far worthless words .... of course in my humble opinion ...

Bottom line. It's a mess and all self inflicted - enfuriating