These last few years European and Japanese car manufacturers have suffered because of the high rates of the yen, euro and sterling against the dollar in a region where many currencies are tied to the greenback. Manufacturers and car importers have had to become currency experts when it comes to trying to get the best deals and have been at pains to stress that the currency fluctuations have been dealt with internally, and not passed on to the customer.
Ultimately, those dealing in high value currencies are well aware that excuses regarding currency rises are not going to work when trying to convince a customer to purchase a car and so they have been working around this problem as best they can.
For many, though, it has meant lower sales as the competitive edge that the currencies gives those brands dealing in dollars means they have a much harder time competing. Michel Trad, director of Saad & Trad representing Fiat, said that sales of Fiat have been hit significantly in Lebanon despite their popularity in Europe, which he puts down to the currency issue. However, those that are dealing in dollars are also stressing that they have not benefited overtly from the currency and that it was a superior product that really gave them the competitive edge.
Many different techniques have been used by the various car manufacturers and their import partners in dealing with strong currencies. Gergi el-Murr, the Kettaneh VW brand manager, claimed that at Kettaneh they have managed to keep the prices completely stable because in dollar zones, invoices are in dollars. “The manufacturers are able to do this because their factories are in dollar zones and so it is a small internal calculation. We are a German product and our prices are high but they have remained stable and have not gone up with euro inflation. This is why we have done this campaign that ‘1euro = $1’ to say that for the next three to four years you can still by the VW for the same price.”
Creating a system in which manufacturers in dollar regions deal only in dollars has been a popular technique in dealing with currency issues. At Porsche they also claim to have been able to keep prices stable, but used a different method. Deesch Papke, managing director of Porsche Middle East, explained that, “It is very important to maintain a stable pricing policy, therefore at Porsche we only price our cars once a year in line with the introduction of the new model year. During the year we use financial mechanisms to maintain the price.”
However, Nabil Bazerji, managing director of Bazerji & Sons representing Suzuki, Maserati and Lancia, does not see any substance in talk about dollar zones and keeping the impact away from the customer. “Don’t believe anyone who says, ‘we buy in dollars so we are safe,’ because they will always make a price increase. They have to because there original cost is in euros. Even if they buy in dollars, did they tell you how many price adjustments they got from the factory over the past twelve months? And price adjustments in our industry can come in many ways and means.” Farid Homsy, director at IMPEX, dealer of GM cars in Lebanon, claims that they did not experience a significant advantage in dealing with dollars. “From a dealer’s point of view the impact of the euro was not fully applied to the European brands. Usually, when you have a euro fluctuation one third is absorbed by the manufacturer and only one third is reflected to the consumer. When the impact was 30% of the euro is does not mean we had a 30% advantage; we really had 10%, but it did definitely help us,” he said.
Fluctuations in international currency rates, especially at the moment, are becoming increasingly difficult to predict and will be a continued source of problems for car manufacturers and their import partners. Yet this issue will remain for the foreseeable future and there is little that can be done beyond minimizing the impact through currency monitoring.
