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Car Buyers' Guide: Dollar parity but not price parity
By Jack Biddle • 02/05/2015
NEW CARS SEEM A LOT CHEAPER IN AUSTRALIA
Why the price difference between Kiwi and Australian new vehicles?
Driven has received an email from John asking us to look into and comment on new vehicle list price differences between New Zealand and Australia.
“The NZ$ and A$ are almost at parity and will be soon if the trend continues, however when comparing list prices of similar spec cars for sale in both countries you are in for an expensive shock. Using the new Ford Mondeo as an example, and comparing the prices from their respective websites, you can see that the Ambiente Hatch 2.0 EcoBoost 149kW is currently listed at A$32,790 in Australia but the same car is listed in NZ for $43,990, and that price difference continues for the full range.
One can import a new car from Australia, pay for shipping and GST and still be better off. All they are doing is marketing these vehicles at competitive prices with other new cars in that segment. The above applies to other new vehicle distributors in NZ also that import their cars from the same overseas factories” says John.
On the surface the price discrepancy between NZ and its closest neighbour sounds rather disproportional but I wouldn’t be jumping on a plane just yet to order my new Mondeo, or any other make or model for that matter.
While you have selected a make and model with apparently identical specification levels, it is dangerous to assume that trend follows for all other brands or specific models. I know there are vehicles currently sold new here that have a far higher specification level than what is sold new in Australia. Yes, they may be more expensive here but in one example I can think of, it is basically old technology verses new.
Forward planning which includes pricing, volume and trying to determine specification levels for a particular market is not like ordering a home delivery pizza where you ring, select your topping and wait 30 minutes for the front door bell to ring. Months of prior planning goes into bringing any new vehicle to market and is not without some risk. Exchange rates can and do vary and while gains can be made they can just as easily be lost.
David Crawford the CEO of the Motor Industry Association who represents the majority of the new vehicle distributors in New Zealand said there were many factors determining the price.
He said the following factors helped influence the differences in prices between the two countries:
The relative exchange rate, which lags in real terms due to forward pricing arrangements.
The currency a vehicle is purchased in. Different Distributors will purchase vehicles using different currency settings, such as the Euro, the Yen, the US dollar, and the Australian dollar.
Size of the market. The Australian market is over 10 times larger than New Zealand. Consequently they have slightly different purchasing power compared to NZ Distributors. Also, while overheads are similar, theirs can be spread over a much larger number of vehicles.
For quite a few models there are slight differences in vehicle specifications, even when the model name is the same.
NZ Distributors commonly sell vehicles with extended warranties and in some cases road/maintenance service programmes built into the price, whereas in Australia this is not yet common practice.
Tom Clancy the Communications & Government Affairs Manager for Ford Motor Company New Zealand, was also keen to add comment when asked. “We do actively monitor currencies, including the AUD, USD, Yen and Thai Baht. Our prices are based on a number of factors though – not just the Aussie dollar. If only it was that easy!
"As your reader says, we price according to the NZ market and the competition. Please keep in mind, it also goes the other way – if the NZD dollar drops against the AUD in the six months, we can’t just raise prices either. And further to that point, if you look at pricing in the UK, the Mondeo is actually cheaper in NZ. Given the all-new Mondeo is from Europe, do we then raise prices? No. NZ is a very, very competitive market” says Mr Clancy.
The other important point to remember from a buyer’s perspective is there are many vehicles sold in the highly competitive mainstream NZ market at discounted prices. Certainly not in the first week of a new release, but if buyers are prepared to wait then retail prices do fluctuate. You only have to look at print, TV and internet advertising to see some pretty heavy discounting going on.
Readers may also remember my column a couple of weeks back when I wrote about the differences in Recommend Retail prices and Recommended Special prices. The Toyota Corolla GLX hatch was used as one example of a reduction of around $8,000. Nissan were also offering a $5,000 factory bonus on the Pulsar range.
All new vehicle distributors live in hope their vehicles hit the sweet spot with potential buyers in terms of appeal and cost. If they don’t, they are often left with a lot of metal sitting around and profits quickly evaporating.
I can’t think of a more competitive time within the new car industry in New Zealand. New vehicles at the lower price levels are being fitted with a host of safety and occupant features once reserved for the more elite brands. And in some cases we see price reductions from previous models.
John has raised a very good point however, and the industry should be aware that they are being watched carefully. Consumers like him do at the end of the day, have the final say and will vote with their feet and hold off purchasing or look for better deals if initial prices are set too high in their eyes.