MB Prices May Rise a Lot.

[hawk20]

MB Prices May Rise a Lot.


I think I’m right in saying there is legislation that means we Brits must be allowed to order right hand drive cars from any dealer in the EU at their local price and similarly French and German buyers and others can order left hand drive in the UK. The idea is that this will lead to trade to roughly equalise prices (apart from differences in VAT). Is this so?

In the past, the UK used to be dear but the import trade appears to have forced prices close together. In recent years the gain from importing has been pretty small and the trade has shrunk.

However, what worries me now is that the pound has nose-dived and by so much that I fear it is inevitable that MB will eventually have to raise prices in the UK and by a very considerable amount.

The pound has dropped by around 25% against the Euro in under a year. So prices would need to go up by 100/75 for MB to get the same number of Euros per car as before i.e. by a third from current levels.

If they don’t put up prices they will lose heavily on UK sales and will see a flood of Europeans coming here to order LHD cars from UK dealers at UK prices. Tell me if I’m wrong.

I’m no expert in making cross-border comparisons and hope others will chip in. But I’ve had a brief look. Since I own one, and since it won’t be replaced until 2010, I have taken the E220cdi Estate as a basis for comparison, ignoring discounts.

It would be interesting to know the price in Euros of an E220cdi, for example, in Germany or France and what it would be here in pounds if priced to yield the same number of Euros. Differences in spec make comparisons a bit difficult but it should be possible to get close enough to get a rough idea.


I had a look at the MB International website. It shows prices in France and Germany etc etc. I configured my E220cdi Avantgarde estate, automatic, with parktronic, leather, tinted windows, memory seats etc which has a list price of around £40k in the UK and in France the list came to 55,800 euros (and very similar in Germany). At close to one euro to the pound that looks a lot more than we are paying. Even allowing for 19.6% vat in France and is it still 16% in Germany?

My question is: have I got this right? And secondly, in time will our prices have to rise to roughly equal the Euro price in France and Germany? Because at the moment on the figures I’ve got their prices are about a third higher than ours! I hope I’ve made some big mistakes here!

 

[JEZ.S320L]

Unless legislation has changed in the last 12 months, it is not possible to buy a non-UK spec vehicle (e.g. LHD) from a UK Dealership of ANY car maufacturer.

We went through this painful exercise in the early days prior moving to Spain.

What we presumed to be a simple process - buy a new LHD vehicle in the UK and drive down to Spain and re-register on Spanish plates - proved to be a minefield of Specifications, Warranties, Tax etc etc

We gave up with the idea of buying a new car in the UK :roll:

 

[rf065]

I can remember that legislation being brought in & heard of many cases where the car dealers seemed to be told by the manufacturers not to accept such orders, under threat of losing their franchise.

The result was dealers who refused point blank to sell you a car or went about it in such a manner as to put that many obstacles in your way that you had to give up, or the order they put in for you to the manufacturer never seemed to get processed any further.

All of this was illegal on their part, but the threat from the supplying manufacturer was taken seriously enough for the dealers to break the law.
If I remember correctly, a couple of manufacturers were prosecuted, but even then, it was still difficult to find a dealer willing to sell you a car built for another market although there were a few who would gladly do it and sold as many as they could despite the manufacturers threats.

Russ

 

[Alex M Grieve]

But I’ve had a brief look. Since I own one, and since it won’t be replaced until 2010, I have taken the E220cdi Estate as a basis for comparison, ignoring discounts.

Well done hawk20. This is a fascinating post, but will no doubt flush out a number of gaps between theory and practise. As others have pointed out, the right to do it and doing it are 2 different things and all sorts of vested interests will get in the way.

The equation must be most confused for the manufacturers, whose position I do no envy, by the practicalities of car ownership - on which each of us has their own expertise.

As a student in the 1960s, at a time when cars with a reconditioned engine carried a rear window sticker "Running in, please pass", I used to run 1950s motor cars which were so unreliable that I fashioned a sticker "Running out, please pass".

Students today have it easy. The quality, duarability and corrosion resistance of many ten year old cars is so good that they have lots of life ahead of them, and if hawk20 or I was the "One owner, FMBSH" vendor, it probably looks like a new car too. And there is so much choice.

So my point is, with my current cars and the arithmetic which hawk20 has outlined, I will not be buying any time soon, and probably never buy new again (unless pre-registered gets to be rather cheaper than brand new, as it did with the last of the W203s last year).

So what does a manufacturer do? They say they only build to order, to prevent filling the airfields full of cars that Lee Iacoca beat out of Chrysler in the 1960s to save them from certain death. To maintain the means of production and the volumes which ensure quality, manufacturers today still build spectulatively, I believe, based on their intelligence on which colours and options sell best. If you want such a car, mysteriously, the availability is good, but the ASSYST soon tells the real truth and asks for a service before you get it off the forecourt.

I suspect that it will not be the emergence of the eco car that kills the motor industry as we know it, but an amalgam of all these things.

But I've got mine, and they work, so I'm OK. Or am I not?

 

[rf065]

Some interesting reading here on the subject, first one from 1999 shows the difficulties in ordering a car from abroad when the laws first changed.

http://www.independent.co.uk/news/business/dont-buy-it-car-buyers-1105299.html

This one explains the block exemption laws & shows that VW were fined on two occasions, 102 million & 30.96 million. Opal were fined 43 million & Mercedes fined 71.825 million, I presume these were all Euros, for blocking sales from other countries.

http://rile.brinkster.net/Thesis/nalpantidou.pdf

Russ

 

[pma]

I have a E 220 cdi bought in France where I live I paid 36,000€ in March this year ( the retail price was 48,000€ most MB are discounted in europe ) 36,000 / 1.45 = £24,830 ( 1.45 was the rate in March 08 ) about the same as it would cost in the UK at that time but now with the exchange as it is the UK would a lot cheaper.
In the past I have impoted a Volvo from Denmark & a Ford from Sweden making a very large saving on UK prices I did try to buy a MB but they make it very hard long waiting times plus a £1500 charge to have the car RHD. But it should be posible and cheaper ( with the exchange rate at this time ) for an european to buy in the UK

 

[television]

The last of the worthwhile imports ended in 1998 when the makers closed the doors by making it too hard. Cars in Denmark are the most heavily taxed in the world. The SL500 cost over £325,000 there new. During the 90's and when I lived in Sweden it payed to buy your MB in Denmark as the base price was pushed down as low as possible to compensate. The short comings were in the end that the cars were never delivered in the end. The other thing to make it worse is the guarantee that looses 1 year on an import. My V70R came from Holland with a £8k saving in 1998, and I think that Ireland was the cheapest in 2001, but not any longer

 

[pma]

The last of the worthwhile imports ended in 1998 when the makers closed the doors by making it too hard. Cars in Denmark are the most heavily taxed in the world. The SL500 cost over £325,000 there new. During the 90's and when I lived in Sweden it payed to buy your MB in Denmark as the base price was pushed down as low as possible to compensate. The short comings were in the end that the cars were never delivered in the end. The other thing to make it worse is the guarantee that looses 1 year on an import. My V70R came from Holland with a £8k saving in 1998, and I think that Ireland was the cheapest in 2001, but not any longer

I dont agree with what you say in 2000 I bought a V70 volvo ( in Denmark ) and saved £8000 on the UK price & and in 2002 I bought ( in Boras Sweden ) a Ford Mondeo estate cdti ghia X and saved £6500 on the UK price I would have got a discount in the UK but not this much.

Now if I was to buy a Jaguar XF in the UK for export to France in would cost about £37,000 - 15% Vat X 1.05 = €33,022 Then pay 19.5% French TVA = €39,461 the car cost in France €55,000 this would be a saving of about €15,000

 

[djb]

an interesting post hawk20, I think you are correct, other than everybody wll need to raise prices after the present stock depleation phase has finished. The pound is substantially lower than the fall in world prices, for an example petrol should be about 75ppl now it is back to 40$ pb. If we think this year has been bad, god help us in what follows.

Gordon B inherited the most stable economic state and reduced it to rubble in 11 years.
who thiks he can build it back?

 

[television]

I dont agree with what you say in 2000 I bought a V70 volvo ( in Denmark ) and saved £8000 on the UK price & and in 2002 I bought ( in Boras Sweden ) a Ford Mondeo estate cdti ghia X and saved £6500 on the UK price I would have got a discount in the UK but not this much.

Now if I was to buy a Jaguar XF in the UK for export to France in would cost about £37,000 - 15% Vat X 1.05 = €33,022 Then pay 19.5% French TVA = €39,461 the car cost in France €55,000 this would be a saving of about €15,000

Are we talking LHD or RHD The Swedish "teknikens Värld" used to give all of the info on how to buy from Denmark back in the late 90's but switched to Germany when it was found that new cars ordered in Denmark were never delivered, and they are all LHD. Living in the UK and importing from Sweden was OK with the exchange rate at 14 to1 but that has gone now back to almost 10 to 1

 

[Rory]

The pound has dropped by around 25% against the Euro in under a year. So prices would need to go up by 100/75 for MB to get the same number of Euros per car as before i.e. by a third from current levels.

That's true, but to many people it's puzzling why the Euro is so strong against Sterling and US Dollar. The German economy for example (and it's not widely realised that Germany is the world largest exporter, excluding services) is being hammered due to the strength of the Euro and it's significantly dependant on car production.

Also, bear in mind that for many years car manufacturers have regarded the UK as "Treasure Island" as we've suffered very high pre-tax prices. Look at how cheap MB's (and others) have been in the US for many years.

If the Euro does weaken then prices could even up pretty quickly.

 

[truthfindergeneral]

If you don't have to buy a new car then hang on and make the dealers sweat. They can raise prices if they like but empty showrooms are of little use to them.

 

[pma]

Are we talking LHD or RHD The Swedish "teknikens Värld" used to give all of the info on how to buy from Denmark back in the late 90's but switched to Germany when it was found that new cars ordered in Denmark were never delivered, and they are all LHD. Living in the UK and importing from Sweden was OK with the exchange rate at 14 to1 but that has gone now back to almost 10 to 1

The cars I bought were full UK spec RHD

 

[JEZ.S320L]

..... Gordon B inherited the most stable economic state and reduced it to rubble in 11 years.
who thiks he can build it back?

Alegedly, of course - it would appear to be the same group of parasites who are either Sick, Lame, Lazy or Illegal. With 'benefits' being handed out as if they were in a Woolworths Sale - why would they vote for anyone else? :cry:

 

[hawk20]

Lots of interesting posts, guys. Some comments.
1. It may be illegal or difficult for us to buy a Spanish spec car at a UK dealer. BUT my point is that if our prices remain so much lower than the rest of Europe, then the French, and Spanish and others CAN legally buy a car to their spec here. Just as we can buy a RHD car in France or Belgium.

Importing used to be difficult but in recent years it has got much simpler. And many firms do it all for you.

2. Importing doesn't need to happen on a large scale for it to force manufacturers to bring prices closer together. Significant is all it needs to be.

3. Forget imports for a second. Why should MB keep a different lower price in Euros in the UK than in mainland Europe. I just cannot see why they will do that once the recession is past.

4. Forget America too for a second. Comparisons with their prices are notoriously difficult and there may well be some element of Europe and others dumping surplus production there. My fear is that MB and others will have roughly common prices across Europe (ex vat) as they have until recently and that the fall in the pound will lead to big price increases in MB cars here.

 

[jberks]

I started off agreeing with Hawk's point but after a little research disagreed and now I'm just plain confused.
Manufacturers charge what the market will stand. In some markets they make more than others and they play with the specs accordingly. Yes prices in the euro zone seem very high but this may well have more to do with their core market and taxation than what the mfr's actualy get. Back in the day, we were paying £40k for a basic E class. At the euro rate at the time, that made even overpriced euro cars look cheap so we imported. MB eventually agreed and reduced prices here accordingly (and increased import costs to balance things a bit).

looking at the euro zone I agree prices here look quite reasonable at the moment given the weak £ but look elsewere and things vary. The US for example where a basic E320 costs $55,000. At current rates, with a relatively weak $, that equates to 39,000 euros. A similar car in the Uk costs £36,000. The £ has fallen dramatically but even today that figure equates to nearly 38,000 euros. Ok, less, but not dramatically so.
Look across to Australia and the euro take bounces back up to 50,000 or so. Comparing Aus and the EU it's reasonable to assume that their target take is 50k euros (based on a 70p euro that figure roughly pans out to current prices).

So, yes MB will certainly want to charge more in the short term but their ability to do so, given that its a very competitive sector may be limited. They also have a price/volume quandry. Yes they charge more in say Spain or France but equally they sell a hell of lot less cars in those markets. They are cheaper here and as a result, there are 5 of their products on my street. Volume reduces costs so in some ways, by charging more would reduce rather than increase profits. Its a difficult balancing act. If they did price an E at £50k, the would sell a lot less, increasing overall manufacturing costs and effectively reducing the profits they make in Spain and Denmark. At some level its worth dumping cars in the UK at cost if it keeps costs overall down and hence profits elsewhere higher.

On the future, ok, I also accept that the mess Gordon "is a moron" Brown has made of the economy may mean that the £ may fall further but equally, he will be out of office pretty soon (please god) and we can start rebuilding. The UK is fundamentally a hard working economy with commercial, innovative and technical skills the rest of the world envy (yes really!!) so I'm not quite as pessimistic about our future as I could be. The Euro zone is saddled with a lot of backward economic activity, left wing mentalities (look at French working practices) and other inneficient attitudes. We're far more US minded, prepared to get stuck in and make money. Yes, China and India are a major threat but neither culture has they innovative and 'out of the box' cultures that we and the US share. I've worked with India and China extensively over the last few years and thinking rationally, if we choose to, we can kick their backsides with minimal effort. I liken them to children, yes one day they can do what an adult can, but at the moment they simply make fools of themselves. I've worked with some of their top IT people, and lets just say I don't feel threatened just yet. The people I'm working with now are of Spanish extraction and lets just say, the Uk guys I worked with earlier in the year could chew them up and spit them out. This has been repeated every time I work with 'foreigners'. None have ever come close to the productivity of a Brit or Yank. It's a simple cultural thing I guess but it should help us rebuild our economy faster than our competitors.
When we do, the £ will rise and prices will stabilise.

 

[Alex M Grieve]

The UK is fundamentally a hard working economy with commercial, innovative and technical skills the rest of the world envy (yes really!!) so I'm not quite as pessimistic about our future as I could be.

This point is fundamental and the most important in an otherwise highly relevant post by jberks.

The thinkers in UK industry have known for some time now that it is innovation which differentiates us here in the UK - so we invent things and then let others make them. The others have much lower labour costs and would be likely to undercut us on that. I agree that materials, energy, transportation of goods, proximity to market are all factors, but innovation should carry the highest premium.

Sadly, with so many people skulking on benefits, the need for differentiation in this way has never been greater - but is it working?

 

[JEZ.S320L]

To add to the debate about MB's costed at 'what the local economy can afford' - hence the pricing differentials country-to-country. Wasn't it a case (or maybe still is) that over-production of certain models, resulted in MB off-loading at cost price, to those countries where tourism was growing? This resulted in an almost exclusive, MB taxi operation. MB profits would be enhanced by selling spares, as the vehicles became older.

Short-term pain for long-term gain?

 

[hawk20]

Forget America and Australia for a second. Comparisons with their prices are notoriously difficult and there may well be some element of European manufacturuers and others dumping surplus production there. And it is not easy to import from either in order to force prices closer together

Just concentrate on Europe for a second. Various laws, consumer group pressures, information in the Press and other media, and the possibilty and relative ease of importing from other European countries, have led to prices being relatively close together in Europe's major countries in recent years. My fear is that MB and others will continue to have roughly common prices across Europe (ex vat) as they have until recently and that the fall in the pound will lead to big price increases in MB car prices here.

If they don'y raise prices here then why won't French people come here to order LHD vehicles which they are fully and legally entitled to do. And others. Until MB are forced to keep prices pretty close together. Isn't that what the EU was meant to be all about? Free trade?

 

[DC_insider]

It would be interesting to know the price in Euros of an E220cdi, for example, in Germany or France and what it would be here in pounds if priced to yield the same number of Euros. Differences in spec make comparisons a bit difficult but it should be possible to get close enough to get a rough idea.

Differences in spec and local taxes make comparing prices difficult but in the example of the most basic E220CDi:

German price in Euros excluding tax is €34,500.

UK price in GBP excluding tax is £24,459.57 (being the on the road price of £28,887.44 less £613.93 of delivery, plates, registration etc, less VED and VAT at 15%).

Current €:£ rate is 1.04 so the UK price is roughly equivalent to €25,438 or 26% less than in Germany.

Will UK prices rise? I think that depends on whether MB think that the Pound will bounce back against the Euro or if they think that the Pound was overvalued against the Euro and is now finding its correct level. If it is the latter then I think you will see price rises over the next few years.