December 15, 2015
The recent drop in the Canadian dollar, now trading around 70 cents U.S., could lead to a round of price increases. Based on prior experience with the automakers, the price hikes, likely in the range of $100 to $400 a vehicle, may be disguised as increased freight charges, or hidden in an increased price to dealers with no change in the published retail price (over the long term, increasing the price to the dealer without increasing the published retail price puts a squeeze on dealers). If these increases occur, the first ones would become effective Monday January 4th, 2016.
Competition in most segments is so vigorous that the APA predicts most automaker promotions will continue into the new year. Some of the two and three-month payment "holidays", which are timed for the Christmas season may end, but zero and low interest financing, and subsidized lease rates will continue. Here`s a look at the APA`s roundup of this month`s promotions.
The APA asked couple of of industry experts for their predictions about price increases in early 2016
Canada`s auto industry authority, Dennis Desrosiers, told us that the five large vehicle manufacturers in Canada -- Ford, GM, FiatChrysler, Honda and Toyota all export more vehicles than they import, and are net winners at current exchange rates, even though the added cost of importing parts eats away at some of this advantage. "Together they can keep prices low if they choose to. These five dominate the market; they are the price setters, so the others may not have any choice but to keep their prices in line."
Former auto dealer and consulting expert to the APA, John Raymond, predicts prices won`t change, with the possible exception of the following:
Vehicles selling very well in the US may have supply restrictions in Canada that could contribute to less discounting -- Jeep and Subaru come to mind. The super premium import brands may increase prices on their largest sedans and sports cars. The automakers cannot afford to increase prices in the small and midsize vehicle segments.
He added "I don`t see manufacturers eating into dealer profit margins to cover the currency loss. They have taken plenty already!" John provided a sampling of current retail margins to make his point:
Base Nissan Micra - less than $500 of maximum markup before discounting
Toyota Tacoma 4x2 Automatic - just $1,300 markup before discounting
Base Ford Mustang V6 Convertible - less than $1,200
"Imagine selling a pickup or a Mustang and making less than $1,000? The dealer hopes they can pick up something in the closing office," he observed.