• Feb 26, 2007

The Jetta has trouble competing against the Civic on price alone

The European manufacturers have even more trouble competing against the Japanese currency juggernaut. High-dollar BMW and Mercedes can hang with the likes of Lexus, but high-volume manufacturers can't even keep up with the prices of US automakers much less the Japanese. The reason is the extremely high value of the Euro. VW makes great cars and they even have a "three for less than $17,000" ad but when content is added the price skyrockets. Put the Civic next to the Jetta in a price vs. content contest and the Civic wins. It's not as big a deal for VW here in the US as it is in their home market, where Japanese automakers are eating up market-share.

In the US some are saying the Democratic Congress will look to erase the currency deficit to protect domestic automakers, but other than making an open plea to the Japanese government to raise interest rates the only other option is a tariff. That just doesn't jive that well with the whole "free trade" principal that makes the US so attractive to manufacturers the world over.

In the end, even the Japanese automakers are vulnerable to still lower-cost automakers. Many reviews of the Yaris have been less than glowing because of cheap materials and poor performance. To me that means Toyota has to sweat a bit to make a top-notch vehicle for $13,000. Hyundai won't have the same problems. Due to cheap labor and even cheaper currency, they'll be able to produce the same vehicle with better materials for less money. Ford, GM and others will have to make their small cars in Mexico or China to compete and the US consumer will win: unless they make their money in manufacturing.



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  • 28 Comments
      • 7 Years Ago
      So, this is the reason why American made Camrys are outselling the Mexican made Fusion?
      • 7 Years Ago
      Don't forget though we wouldn't be able to afford our HUGE deficits if people weren't willing to buy our bonds. The figures I've read are somewhere between 20-30% of our current debt is financed by East Asia. So we do get some benefit...
      • 7 Years Ago
      This is just a side effect of deficit spending. It causes crowding out thus higher interest rates. Although a equilibrium should be reached to eliminate this arbitrage situation.
      • 7 Years Ago
      #3 Petey you finally get it!!!!! It's not where the car is made IT'S WHERE THE MONEY GOES!!!! "FOLLOW THE MONEY TRAIL"
      • 7 Years Ago
      To the Japanese, they own the big fat Americans. We work for them and we buy from them.

      Let's face it, USA is no longer a sovereign nation. We are a colony of workers and consumers for the Japanese. That's okay with many Americans, so I guess we have nothing to complain about.
      • 7 Years Ago
      I am sick and tired of people saying Toyota, Nissan, Honda,and Subaru build cars and trucks here in the US. You are misstating the facts. So much of the parts for these Japanese cars come from other countries, all that can be said is, They ASSEMBLE cars and trucks here using most parts from other countries such as China. There is a big difference between assembling a vehicle here, and building one here. The US auto makers are still way ahead of the Japanese in making parts for thier cars and trucks right here in the good old U.S.A. One thing no one seems to want to talk about is how many parts suppliers were bought up by the Japanese, just so they can fool everybody into thinking a lot of them are using parts made in the US. When in reality, those parts suppliers are Japanese owned.
      I have been buying American cars and trucks for over 44 years and have never had any kind of desire to purchase any car or trucks made by the Japanese manufacturers. I have honestly been totally satisfied with each and every car and truck I have purchased at GM,Ford, and Chrysler dealerships.
      • 7 Years Ago
      "Americans are the same, and choose expensive Japanese brand quality over the big 3's intentional cheapo marketing. But not VW expensive."

      Apparently someone hasn't seen the "3 V-dubs under 17 grand" commercials yet.
      • 7 Years Ago
      Um, it is quite interesting that people are choosing to forget that Bush devaluated USD when he came to power, and compared to Euro, USD is now 30%-35% lesser value than 6 years ago.

      I get american paycheck in Europe, so I can feel the difference.

      This is why GW administration doesnt complain about Japan, as there are other industries and services, where this is beneficial to USA.

      Besides, Toyota sold around 55% US built cars (with overall >70% US content in ALL cars sold) and is building new factories to produce more countries in the USA.

      It is clear that they are doing what they can, which is why politicians are not complaining.

      Same goes with Europe, as Toyota is producing ALL of their models, except for SUV's, in Europe - with over 9 factories, and production for Yaris, Corolla, Corolla Verso, Auris, Aygo, and Avensis.

      So Europeans definetly cant complain about that either...
      • 7 Years Ago
      #12, not sure how well you did on econ 101.

      of course, politics, us trade deficit, iraq, budget deficit matter. why? because those will affect the interest rate.

      japanese companies do have an advantage because of the support they receive from japanese government in many ways besides of the currency manipulation

      japanese government has been prefer to have profits on trade rather than keeping inflation rate in check. that caused the crash of the bubble in late 80s to early 90s. the weak japanese yen will create more profits for exports driven japanese industry companies like toyota. they borrow cheap & get more money when they exchange dollar/euro to yen.

      one of the reason why us cannot touch this matter seriously with japan and china is because they buy us treasury bonds a lot. that will basically finance us government cheap, so when us try to talk about the japanese companies unfair advantage, they cannot really pressure a lot because japanese government might not buy enough or even sell us bonds which will cause interests rate goes up.

      #12's rate quote of 0.50% of japanese interest rate is for the banks operate in japan only & 5.25% rate of us rate is also for the banks in us only.

      even if that rate is available, you won't make money by moving your loan from japan to us as there will be tons of currency exchange fees; besides, japanese banks won't loan you unless it is used in japan; there are bank regulations.

      the only reasons why us has low interest rate + relatively low inflation are chinese cheap goods & services & housing boom which created tons of mortgages. us won't probably follow the steps of japanese economy crash of early 90s, but who knows what will happen in future.
      • 7 Years Ago
      "Ahh, there's always SOMETHING to explain why America can't build a competitive automobile (particularly one without an offensively cheap-o interior)."

      There you go, an opening for you to make millions. That is how it works. You can (at least you act like) make a better interior for the same cost as GM's and Ford's suppliers then you put in your company to bid on the contract. This is super, I can't wait for all the new interiors your company is going to make!! You are going to save GM and Ford from their ugly interiors single handedly. No wait, why am I so excited, you are import fanboy # 3927 who complains but doesn't capitalize on the situation. Oh well. All talk and no action.
      • 7 Years Ago
      Look at VW's complete dominance of the European market.
      Asian manufacturers can barely crack Europe.
      Europeans are willing to pay high price for high quality. So does many other developed countries, including Americans.
      Most markets in the world think American cars are crap, and are willing to pay more for higher quality.
      The big 3's failure is their own choosing of how to market their cars. Cheapo is not the way to market to developed countries.
      • 7 Years Ago
      >>>It's not as big a deal for VW here in the US as it is in their home market, where Japanese automakers are eating up market-share.
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