View Full Version : Passing on lower Importy Duty Pricing
kailey34
01-12-2009, 01:27 PM
Has anybody had it confirmed that VW will be passing on the reduction in import duty (1 Jan 2010) into its pricing for the GTI and other Golf models? Has anybody factored this figure into their negotiations?
Last I heard VW were taking a 'wait and see approach' and watching what their competitors were doing.
Glennb
01-12-2009, 01:34 PM
I asked this question on Saturday when ordering the Tig and the answer was no they are not passing on any discount to the buyer.
Maverick
01-12-2009, 02:03 PM
This has been discussed to death a number of times already, VW may have already passed on the discount in the Mark 6 pricing but until VW makes an announcement everyone is guessing.
I don't think VW will be swayed by the actions of it's competitors either.
kailey34
01-12-2009, 03:51 PM
Thanks. I realise we have talked about this before however it's frustrating that its now 2 Dec and VW don't appear to have announced what their plans are. I'm sure like any good corporate business they would be well into their 2010 business planning and would know what their intentions are by now. It's just difficult to understand why they can't be transparent about this and reveal this information to their loyal customers.
Maverick
01-12-2009, 04:22 PM
They don't have to announce anything so they may not. This is a cost for them and they are under no obligation to pass on any savings just like they choose not to pass on increased costs when the dollar drops for example.
http://www.watoday.com.au/drive/motor-news/tariff-cut-bonus-for-newcar-buyers-20091120-iqjy.html
It could be a happy new year for car buyers — if manufacturers pass on a tariff cut.
When the fireworks erupt at midnight on December 31, car buyers could be in for a happy start to the new year.
That’s because the tariff on imported cars will drop from 10 per cent to 5 per cent overnight. Theoretically, that translates to a price cut of about 3 per cent on a new imported car.
But before you break out the champagne, theory doesn’t always translate into practice, especially in the car industry.
Manufacturers have been battered by the global financial crisis over the past year, and, while few of them are willing to admit it, most are hoping to pocket the tariff windfall rather than pass it on to the buyer.
So far, Mazda is the only volume-selling importer to bite the bullet and pass on the savings, doing so ahead of time (from last month) in the hope of getting a marketing advantage from being first with the good news.
Porsche has also begun to pass on savings via its recently launched Panamera grand tourer, while Mercedes-Benz has flagged it will also follow suit in the new year.
But in a telling response, other importers have either declined to match Mazda’s move, or have adopted a wait-and-see approach.
There’s a further complication for the buyer weighing up the benefits of buying now or waiting for a tariff reduction to filter through to car showrooms in the new year.
About 16 per cent of new cars sold in Australia are locally built, so are not directly affected by the tariff change. Another large slice — cars built in Thailand — are already exempt from tariffs thanks to a free trade agreement with Australia. They make up a further 15per cent of the market.
The impact of the tariff change is further diluted by the fact that four-wheel-drives, which make up about one-in-five new vehicles sold, won’t benefit from a tariff cut because they already attract only a 5 per cent impost.
So will car prices come down in January?
“The last time the tariff dropped by 5 per cent we saw a retail price reduction of about 2Ľ per cent,’’ says Santo Ammodio, managing director of independent valuer Glass’s Guide.
“The real question, though, is whether importers choose to pass on the savings, or use them to bolster profit margins.”
Hyundai, Australia’s fifth-largest car brand and the only car maker in the top 10 to have grown sales in 2009, is cagey about its response to the tariff reduction.
“We understand the tariff affects us as an importer,” says spokesman Ben Hershman, “and we don’t necessarily feel bound to pass the reduction through as a price reduction.” That is the crux of the issue. The import tariff is a cost to the importer of doing business. It is not a direct fee to the consumer and as such there’s no onus on importers to pass on the savings.
A spokeswoman for the Australian Competition and Consumer Commission, Lin Enright, concurs. “Pricing is set by the market. This has nothing directly to do with pricing, therefore we won’t be taking a close interest in it.”
In other words, it is up to the car company whether it pockets the difference or reduces prices, or uses the difference to add equipment. And few of them are saying. Hershman refuses to be drawn on whether Hyundai will cut prices on January1. “It’s too early to speculate on exactly what action, if any, we will take,” hesays.
Honda won’t even admit they’re looking at it. “We’re not making any comment on our pricing strategy,” says its general manager of sales and marketing, Stephen Collins.
Suzuki Australia is evaluating its 2010 range, says managing director Tony Devers, who doesn’t sound like a man with good news for the consumer.
“It’s been a tough 12 months for the car industry. Cars are more affordable than ever, profits are slimmer than ever. Factories need to make a profit or they close,” he says.
“I think most importers will probably be maintaining price despite the tariff drop, or maybe they’ll increase specifications because there’s very little wiggle room.”
Subaru managing director Nick Senior is singing a similar tune.
“We’ve been working in an environment of extreme pressure and we need to get back to some reasonable margins on vehicles,’’ he says.
“A tariff drop from 5 to 10 per cent is not a big difference and to think that dropping the tariff will lead to lower prices is fairly simplistic. A lot of things have been factored in.”
One of those, he says, is the improved value equation factored into each new model. “We’ve reduced the price of the [new] Subaru Liberty GT by $5000 and put more equipment in the car.”
Senior doesn’t believe many brands will pass on the savings. “When it [the import tariff] went from 15 to 10 per cent, how many prices changed?”
Information shown to Drive indicates the 5per cent import duty drop equates to about $300 on a $15,000 car and about $1200 on a $40,000 car.
But whether those savings make it to the showroom floor depends on each importer.
Mazda’s decision to pass on the reduction across its passenger range three months early should put pressure on its rivals as the company is Australia’s biggest full-line importer.
“We’ve passed on the duty reduction on all our passenger cars,” says national sales manager Alastair Doak.
‘‘We always had the feeling it was essentially a tax, so we always intended to pass on the reduction to our customers.”
The saving? “A little over 3 per cent.”
End-of-year sales are nothing new as importers chase budgets and quotas, so who’s to say Mazda’s “duty reduction” sale is anything more than a name of convenience? “This is a long-term change,” Doak says. “It’s not as if it’s going to be a promotion for another month then we pull it off. It’s a step change to our pricing and it’s here to stay.”
The fact that Mazda was happy to talk to Drive and Honda wasn’t speaks volumes for the differing opinions on this topic.
Mazda stands to benefit from an import duty reduction on 80 per cent of its volumes, Honda doesn’t.
In fact, life for all vehicles currently imported under a free trade agreement - including Toyota’s HiLux and Honda’s Jazz, Accord and Civic - just got a little tougher, because their rivals have been handed a 5per cent advantage.
A more correct way to look at it, Ammodio says, is that the FTA imports just had 5 per cent of their free trade advantage whittled away.
“With the tariff drop it’s levelling the playing field. Honda, Toyota and co. had an advantage with the FTA coming out of Thailand. Now they have less of an advantage. The other importers from Europe and Japan will be happy.”
Luxury car makers stand to make a lot more money if they withhold the tariff cut. A 3per cent saving on a $300,000 Porsche 911 Turbo, for example, equates to $9000.
“Yes, we will be passing on tariff reductions,” says Porsche’s Paul Ellis. “In fact, we already started it with the Panamera’s launch price, which included the reduction.
‘‘We’ve passed on the reduction to customers while we’re still taking the hit for every car registered from October to December 31.
“As for the other models - savings will be passed on in one form or another; either a straight reduction on the price, or increased equipment, or a bit of both.’’
Mercedes-Benz, too, is determined to pass on the good news. ‘‘We have not finalised 2010 pricing yet,’’ spokesman David McCarthy told Drive, ‘‘but we intend to pass on the saving to consumers in either a price reduction or a value improvement.’’
The other question that needs to be answered is how it will affect the price of Australian-made cars. Will they be 3per cent to5percent worse off?
‘‘For locally produced cars there should also be some opportunity for benefit because some of the components are imported,’’ Ammodio says. ‘‘So if the components get cheaper, so too should the cars. The question again is whether the savings are passed on to the consumer.’’
So it’s a win-win situation if you’re an importer or a manufacturer. The only losers, it seems, are those that enjoyed the advantage of a free trade agreement.
As for consumers, it’s likely that if companies like Mazda pass on the savings, then others will be forced to match the savings or risk losing their competitiveness.
Even better for consumers, used cars are not expected to drop in value in direct relation to their new car brethren.
‘‘Used car values are really holding up at the moment,’’ Ammodio says. ‘‘There is a shortage of near-new cars on the used car market because of the downturn in the economy in the last 12-18 months. Company fleets and private individuals are holding on to their cars a lot longer.’’
Ammodio says there was ‘‘very little if any adjustment’’ to used car prices as a result of the last tariff change.
So if the 5 per cent tariff cut is expected to have little effect on either used or new car prices, why not go the whole hog and remove the remaining 5 per cent?
continued.......
Maverick
01-12-2009, 04:23 PM
.................
After all, next year is on track to be the first year that Australia’s three manufacturers will export more Australian-made cars than they will sell locally.
Perhaps one reason is the dent it would make in Government coffers.
Tariffs are big business. Import tariffs, according to the Productivity Report prepared by former Victorian premier Steve Bracks, netted the Federal Government a cool $635 million in 2006-07. That equates to a subsidy of nearly $2000 per vehicle produced in Australia. But Australia’s import barrier has come a long way since the dark old days of 1984 when the import duty was 57.5 per cent. But is the local industry ready to be weaned from the teat? Toyota, Australia’s biggest brand, is not so sure.
The Japanese giant almost outsells Holden and Ford combined. It sells locally produced vehicles and imported vehicles, so has to be very careful in speaking out against the tariff reduction. ‘‘The tariff rate has been falling since the 1980s,’’ spokesman Glenn Campbell says. ‘‘The falling tariff has provided greater access to the Australian market for importers, providing consumers with greater choice. However, it has meant that all the growth in the overall market has been captured by importers.’’
Campbell is quick to point out that ‘‘Toyota Australia is generally supportive of free trade’’ but that ‘‘this support must be balanced with the fact that local manufacturing is impacted by tariffs and free trade agreements’’.
Ammodio disagrees. ‘‘Given the state of the Australian auto industry, the import tariff is past its usefulness in Australia.’’
He says ‘‘there are enough taxes on cars already’’ and that the import tax should have been abolished altogether.
‘‘There’s not much difference between 5per cent and zero. I think it’s a token gesture leaving it at 5 per cent, or perhaps [the Government] couldn’t live without the income it generates.’’
Few would argue that the import tariff has kept the Australian car industry viable over the past 25 years, keeping more than 68,000 Australians employed in the car manufacturing industry and supplier chain. But, says Toyota, the tariff reduction is just one more straw for the camel’s back, and at the worst time.
‘‘The impact of the global financial crisis, cost of production, exchange rates and tariff reduction are impacting our local manufacturing performance. We expect that the reduction in tariff will place further pressure on the competitiveness of local car making,’’ Campbell says.
Australia has one of the lowest automotive import tariffs. Thailand, our nearest car-making neighbour, has an 80per cent import car tariff. Korea’s import tariff is 8 per cent. Germany? Ten per cent on passenger vehicles and up to 25 per cent on utes. Japan? Zero tariff. Those four countries export the most cars to Australia, accounting for 70 per cent of all new car sales. About 84 per cent of the 1.012 million new cars sold in Australia in 2008 were imported.
In 2005 just one in eight imported vehicles came from Thailand. Today it’s one in five and Thailand-built cars are on the verge of outselling locally built cars for the first time this year. Four out of five Hondas sold in Australia come from Thailand. The Toyota HiLux, one of the best-selling vehicles in the country, is Thai-built. Most of the light commercial vehicles sold in Australia come from Thailand, as do small passenger cars like the Honda Civic — and, soon, the Ford Fiesta.
With FTAs, the devil lurks in the detail. Thailand did drop its 80 per cent import tariff to zero for large Australian passenger vehicles (with engines over 3000cc) and progressively wound down its 30 per cent tariff on smaller cars to zero as of January 2010. At the same time, though, Thailand upped the sales tax on large passenger cars, effectively negating the FTA’s benefit.
Don’t expect the one-way traffic to end any time soon. In the meantime, Australian car buyers will continue to reap the rewards of one of the world’s most competitive new car markets.
gregozedobe
01-12-2009, 11:08 PM
My simple explanations are:
If VW want to keep the tariff cut $$$ for themselves, all they have to do is say nothing at all.
Even if they do intend to pass on the savings they are still better off saying nothing now, otherwise if they announce it now lots of people will delay their VW purchase until 2010, thus denting VWs (and their dealers) Dec 2009 cashflows.
So in the absence of any compelling reasons to make an announcement now, don't expect any news from VWA this year (if at all).
gareth_oau
02-12-2009, 01:38 AM
the only reason they would pass on the savings is if they felt a lower price would create a lot more sales, or that ther competition was now better priced in comparison
kailey34
02-12-2009, 09:06 AM
Thanks for the feedback all. Oh well with interest rates increasing again yesterday it will be interesting to see if this announcement will effect peoples decision to purchase a new car now or stall it for six months. Perhaps VW should think about using the import duty price reduction as a way to entice those who may be thinking about delaying their purchase to still buy their new car now.
Corey_R
02-12-2009, 10:56 AM
nah... that'd just make sure they offer attractive fixed interest loans to combat that issue ;)
Spook
03-12-2009, 11:32 PM
Honda has also now passed on the tariff reduction, effective from December 1.
http://www.carsales.com.au/news/2009/honda/honda-drops-new-car-prices-17575
Honda Australia has made the decision to pass on import duty savings before the Federal Government's tariff reduction takes place on January 1, 2010. Following Mazda's lead, Honda will drop the prices of some models between by between $1500 and $3000 on cars imported from the UK and Japan.
"We are pleased to pass on these savings on award winning models such as the Accord Euro and Odyssey to our customers a month early," said Honda Australia's General Manager Sales and Marketing, Mr. Stephen Collins.
The Honda City light sedan has been "re-positioned" at $19,490 for the entry-level VTi manual model. Honda's Thai built vehicles not eligible tariff reduction because of the Free Trade Agreement between Australia and Thailand. Furthermore, four-wheel drive vehicles are already subject to an import duty of five percent and will not receive any further reductions.
Honda's reduced pricing began on Tuesday, December 1, 2009, implemented at all Honda dealerships.
Spook
03-12-2009, 11:44 PM
Has anybody had it confirmed that VW will be passing on the reduction in import duty (1 Jan 2010) into its pricing for the GTI and other Golf models? Has anybody factored this figure into their negotiations?
Last I heard VW were taking a 'wait and see approach' and watching what their competitors were doing.
According to this article, the Golf GTI already reflects the reduction in import duty. Not surprising given that prices were unchanged from MkV. The new MY10 Jetta definitely; don't know about the other models.
http://www.goauto.com.au/mellor/mellor.nsf/story2/DBD144BEEBBFA440CA257670002366B2
VW is waiting to see what the competition does before passing on lower duty pricing
16 November 2009
By BYRON MATHIOUDAKIS
VOLKSWAGEN is taking a wait-and-see approach on next year’s five per cent duty cut before deciding if it will pass it on to customers.
Speaking at the launch of the Golf 77TDI and MY10 Jetta range in Melbourne, Volkswagen Group Australia managing director Anka Koeckler said VW was holding back to assess how rival manufacturers and importers reacted to the duty drop before it made a move.
The price of the recently released Golf GTI was the first to reflect the lower import duty – down from ten to five per cent from January 1 2010 – when it went on sale on October 31.
While prices of the MY10 Jetta have also been reduced – by at least $2000 in the case of the volume-selling 118TSI petrol and 103TDI diesel versions – the newly released Golf 77TDI Trendline is more expensive than anticipated.
The latest base-model Golf diesel costs $2700 more than the 90TSI Trendline, while the last-generation Golf 1.9 TDI Trendline – its direct predecessor – was only $2500 more expensive than its base petrol equivalent, the Golf 1.6 Trendline.
Nevertheless, Volkswagen has indicated that a downward price movement for the rest of its passenger car range is probably inevitable.
“We are considering it, but we do not want to reveal the new prices just yet because we are still in negotiations with Germany,” Ms Koeckler said.
“Every time they (flag) price increases we have to figure out how to manage them.
“And we also have to look at what the competition is doing – there has been nothing communicated from Ford or Toyota (for example), so we are looking at what they are doing.
“Mazda, of course, has already made its move, but it is the only competitor so far. And we don’t want to be (among) the first and we don’t want to be the last to communicate what we are going to do.”
Ms Koeckler added that the model-year change time, which tended to occur late in the year, was the best opportunity to implement pricing adjustments.
“We have already communicated (a price drop) for the Jetta and Golf GTI over the last few weeks,” she said.
“We assumed a five per cent (price drop strategy), because we did not want to have to come back to the customer in two months time and communicate (a different pricing strategy).
“Assuming that the government will not change (the duty drop), we have already taken the responsibility to pass on the savings (for new Golf GTI and Jetta buyers).”
In contrast to Mazda’s pre-emptive marketing strike that has already seen prices fall across the range, rival Subaru announced earlier this month that it would most probably not pass on any duty related price falls, due to the slim margins that it has operated on over the last 12 to 18 months.
kailey34
04-12-2009, 10:48 AM
Thanks. Why then aren't the dealers confirming the details from this article? When I speak to dealers re the GTI they continue to state there has been no decision from VWA.
pologti18t
04-12-2009, 12:46 PM
Thanks. Why then aren't the dealers confirming the details from this article? When I speak to dealers re the GTI they continue to state there has been no decision from VWA.
Didn't you answer your question in your first post?
Last I heard VW were taking a 'wait and see approach' and watching what their competitors were doing.
and this article extract:
The price of the recently released Golf GTI was the first to reflect the lower import duty – down from ten to five per cent from January 1 2010 – when it went on sale on October 31.
So, no price change for GTI after 1/1/2010. Maybe a price change on other Golf models.
Corey_R
04-12-2009, 01:49 PM
@pologti18t, I think kailey34 meant that since VW Australia have already said that the GTI has already factored in the import duty reduction, why aren't the dealers saying that the price has already factored in that reduction! Instead they're saying "it might go down, it might stay, VW Australia haven't said anything". Which as we've found out today, is not correct.
I'm not surprised by this article. It confirms what I've discussed elsewhere. The only surprising thing is that it took over 2.5 weeks to be posted here! hehe
kailey34
04-12-2009, 04:03 PM
Yep Coreying that's exactly what I was saying. We will now ensure we factor no import duty pricing reduction into our dealer/contract negotiations as it appears the dealers should already be accommodating this.
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