US Auto Sales Rise As Import Price Gap Increases Thanks To Rising Yen

US Auto Sales Rise As Import Price Gap Increases Thanks To Rising Yen

Imported vehicles in the United States are selling at their highest price premium in more than a decade, as a result of a weak US dollar compared with other currencies like the Euro and Yen.

The result has been a negative impact on the sales of lower priced imported vehicles, resulting in American buyers switching to domestic brands such as Chevrolet and Ford.

In fact, the average selling price for a new imported car reached a dizzying $31,536 in August, some $7,614 than the average domestic made vehicle during the same period, according to the US Bureau of Economic Analysis.

Automakers such as Honda and Toyota are reluctant to import smaller, cheaper offerings, which traditionally have lower profit margins, than larger, more expensive vehicles. The aftermath of the March 11 earthquake and Tsunami in Japan didn’t help matters, resulting in supply issues that further hampered both production and imports.

Other overseas brands, namely premium priced European offerings, gained a greater proportion of imported new car sales, particularly Volkswagen and Audi, according to findings from Paul Ballew, chief economist for Nationwide Mutual Insurance Co. in Columbus, Ohio.

“It’s very hard to import, especially from Asia, small cars right now because of where the dollar is,” Ballew said. “If you look at luxury-car sales the last few months, they’re up double-digits from a year ago while small cars are down more than 20 percent.”

As the Yen continues its march against the dollar, Japanese manufacturers are less likely to offer incentives to move metal off dealer lots; in fact average industry wide spending on incentives fell some 9.6 percent through September, down to $2,498 per vehicle.

In an effort to counter further profit margin erosion, Japanese automakers are also looking to shift more production of vehicles overseas; Nissan is already boosting investments in plants it operates in Thailand and Mexico, in addition to constructing a new facility in Brazil, scheduled to become operational in 2014.

Toyota meanwhile, is planning to spend some 26.3 billion yen, building a second plant in Indonesia as it aims to build a robust supplier network in that country, part of its goal to not only minimize future supply problems but boost vehicle demand in emerging markets.

Even German automakers such as BMW and Volkswagen are investing heavily overseas, the former expanding operations in South Carolina, while the former has opened a new plant in Tennessee, marking the first time that VW vehicles have been assembled in the US since 1988.

According to Ballew, “import manufacturers cannot afford to do what they’ve normally done in terms of bringing in products from Asian markets. You’re looking at some temporary anomalies, but you’re also looking at some structural changes. There is some renewed energy to bring manufacturing into the US.”

[Source: Automotive News]