dollar/euro and US new car prices?
05-14-2003, 11:09 PM
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dollar/euro and US new car prices?
A year ago the euro was worth about .90 US dollars, today it's worth about 1.15. So a base 996 that cost about 75000 euros (ex. vat) that was about 67500 dollars a year ago would cost about 86250 today. The 03 996 US base price is still 68600. Should we expect a major US dollar price adjustment?
05-14-2003, 11:31 PM
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No!
For the past few years the profits were extra fat, due to the strong US $. e.g. selling finished product in US $ and buying components in Euros. That extra profit now goes away, and Porsche if smart, have "hedged" part of the risk. Anyone with half a brain could see this $ decline coming a mile (or KM ) off.
Any tendancy to raise price is further offset by the current economic conditions. Deflation is here and that's why you're likely to see continued depreciation in all cars.
The Cayenne pricing was probably determined in anticipation of the weakening dollar. (IMO)
For the past few years the profits were extra fat, due to the strong US $. e.g. selling finished product in US $ and buying components in Euros. That extra profit now goes away, and Porsche if smart, have "hedged" part of the risk. Anyone with half a brain could see this $ decline coming a mile (or KM ) off.
Any tendancy to raise price is further offset by the current economic conditions. Deflation is here and that's why you're likely to see continued depreciation in all cars.
The Cayenne pricing was probably determined in anticipation of the weakening dollar. (IMO)
05-15-2003, 12:36 PM
#3
I traded currencies for a large European bank for 15 years. The recent moves in the dollar are not extreme. You've made a good point about the difference in the currency values and the price of the 996. Price elasticity in this economy is pretty tight. Therefore its very hard for companies to raise the price of goods. In the mid 1990's ( 1995, 1996 ) the dollar was much much weaker vs the Euro currencies of the time. Porsche actually lowered the price of the 993 in 1995 vs the previous years 1994 964. On the other side of the coin in 1986 when the dollar was at record post war highs, I believe Porsche set a single year sales record. The dollar and the US domestic economy had a lot to do with that. The point is that the dollars fall is a plus for the US economy and most foreign firms selling product here will try and hold the line on prices in the face of deflation and the hopes of a global economic recovery.
If you could see this coming a mile away i assume you made enough money on the move in the dollar to buy a new 996TT right? Currencies tend to trend much greater then equity markets, but its by no means easy. As far as the question on whether Porsche hedges its exposure, that risk is usually packaged and sold off to a large bank like the ones i used to work for. The bank manages the risk for a fee. Therefore they probably had some game plan for hedgeing....
If you could see this coming a mile away i assume you made enough money on the move in the dollar to buy a new 996TT right? Currencies tend to trend much greater then equity markets, but its by no means easy. As far as the question on whether Porsche hedges its exposure, that risk is usually packaged and sold off to a large bank like the ones i used to work for. The bank manages the risk for a fee. Therefore they probably had some game plan for hedgeing....
05-15-2003, 12:39 PM
#4
payables and receivables.
By the way there is a trade publication called the "Economist" and they produce an index called the "Big Mac Index" It tracks price parity across currencies and boarders. Its a good tool to learn about the currency relationships. Obviously they use the BIG MAC as a baseline.
By the way there is a trade publication called the "Economist" and they produce an index called the "Big Mac Index" It tracks price parity across currencies and boarders. Its a good tool to learn about the currency relationships. Obviously they use the BIG MAC as a baseline.
