Are U.K. / EU car buyers subsidising US car buyers?

[Jag_NE]

Morning all. I appreciate this is somewhat anecdotal but I’ve seen a few examples of this in the past and the prices we pay here for cars seem to be far higher than the US and I was wondering why.

Golf 8 GTI. US VW website - $31625 (manual)
Golf 8 GTI. U.K. VW website - £36800 (manual) = $45591 at todays x rate.

I couldn’t be chewed to compare the specs point by point but we pay roughly 50% more here for essentially the same car. I expect there will be some state specific sales taxes added in the US but I can’t see that massively closing the gap. It appears that the golf 8 is manufactured in Wolfsburg and China, not the US (correct me if needed). If this is the case, the cars sold in the US potentially attract greater shipping and import costs for VW too.

Is this as simple as market based pricing and VW need to sell at the lower US price point to compete? If so, how do we feel about U.K./EU buyers subsidising our friends in the US?

Edited by Jag_NE on Saturday 21st January 09:40

[The Cardinal]

Do the US numbers include all comparable taxes, noting that these may be at lower rates?

[Jag_NE]

The Cardinal said:

Do the US numbers include all comparable taxes, noting that these may be at lower rates?

I doubt they do as I believe they vary by state. I just looked up Texas at random and Google says 6.25%. I’d have been surprised if it were greater than 10% in any state.

[Milemuncher]

Even allowing for the tendency to quote prices without tax, historic OTR prices have still been significantly cheaper.

I remember going to a few ‘Auto shows’ in California in the early 2000s and being astonished at the price differentials.

[Sheepshanks]

The thing that annoys me is the stock US dealers have - we sit waiting 12mths for cars, US buyers expect to change their car same day!

To be fair, I picked a random US city and a dealer there only had one Golf GTI, and it’s $38K. They do have 37 Tiguans though.

[Jag_NE]

Milemuncher said:

Even allowing for the tendency to quote prices without tax, historic OTR prices have still been significantly cheaper.

I remember going to a few ‘Auto shows’ in California in the early 2000s and being astonished at the price differentials.

It’s a bit of a kick in the teeth because I believe people in the US earn more than people in the U.K.

[anonymous-user]

Look on the bright side, we don’t have to live in America.

[Twolane]

Costs more to make a RHD car?
Smaller worldwide market.

[Jag_NE]

Twolane said:

Costs more to make a RHD car?
Smaller worldwide market.

Good point. What are the French and Germans paying for a GTI?

Edit - just had a look on VW Deutschland. My German is patchy at best but a GTI appears to be 39310 Euro = 42759 USD at todays rate which is a few k less than the U.K. but still far more expensive than the US. No international freight or duties to factor in also.

Edited by Jag_NE on Saturday 21st January 09:59

Edited by Jag_NE on Saturday 21st January 10:00

[sticks090460]

It’s similar for other consumer goods. I happen to be interested in photography, so as an example a Canon R3 camera body is £5,879 in the UK, but $5,999 in the USA. Even when you add on the tax, it’s substantially cheaper in the US.

[The spinner of plates]

Most commercial companies employ local pricing strategies that optimise profits, often called a What The Market Will Bear (WTMWB) price.
Basically sets local pricing at the maximum price the market will pay for the product / service in order to achieve the required volumes.

Personally I always thought VAG played a blinder with the Audi brand.
At a bare bones level most of the cars are 90% stock VAG - I'm taking sub-S A4 / A3 stuff, the basic volume filler rep-mobiles.
But with slightly sexier styling, strong investment in aspirational marketing messages, couple of halo models up top, new tech first, couple of extra euros into the cabin materials pot et voila - you've now created something that might cost +5% more to make but the WTMWB is maybe +15%.
Classic revenue growth management (and the reason I don't buy them )

So on a global basis, yes, the high WTMWB markets will be subsidising or balancing the overall P&L vs the low in order to maximise the total manufacturing capacities.

And if the high WTMWB markets keep signing on the dotted line in sufficient numbers... then basic capitalism is working

Obviously if local players are getting together and collude on WTMWB, then most countries have pretty strict laws on this.

Edited by The spinner of plates on Saturday 21st January 10:20

[Mr Tidy]

Jag_NE said:

Morning all. I appreciate this is somewhat anecdotal but I’ve seen a few examples of this in the past and the prices we pay here for cars seem to be far higher than the US and I was wondering why.

Golf 8 GTI. US VW website - $31625 (manual)
Golf 8 GTI. U.K. VW website - £36800 (manual) = $45591 at todays x rate.

I couldn’t be chewed to compare the specs point by point but we pay roughly 50% more here for essentially the same car. I expect there will be some state specific sales taxes added in the US but I can’t see that massively closing the gap. It appears that the golf 8 is manufactured in Wolfsburg and China, not the US (correct me if needed). If this is the case, the cars sold in the US potentially attract greater shipping and import costs for VW too.

Is this as simple as market based pricing and VW need to sell at the lower US price point to compete? If so, how do we feel about U.K./EU buyers subsidising our friends in the US?

Edited by Jag_NE on Saturday 21st January 09:40

New prices may be lower in the US, but UK used prices are a bargain compared to the US and the EU. Works for me!

[GroundEffect]

Go live in that circus then. The UK is comparable to Europe peers so I'm fine with it.