Auto manufacturers in Canada are clearly getting desperate. This morning's Globe and Mail came with an 8 page
propaganda piece advertising supplement to explain why Canadians pay more for cars than Americans do. With headlines like The pitfalls of price matching and Why things cost more in Canada, this piece was a regular comedy festival. Some of the chestnuts include:
- lower prices would ruin the Canadian used car market.
- wages, rent and property taxes are different in Canada.
- the cost of operating a business in Canada is different from the US.
- the cost of marketing is higher in Canada because materials have to be produced in both official languages.
- taxes are higher in Canada.
According to this piece, what we Canadians really want is equivalent monthly payments. Change the interest rates, or stretch out the payment schedule, and we should be happy to pay more.
I wonder if these guys have any bridges for sale?
Now, I don't know what it costs to run an auto business in Canada. However, a common feature of pricing algorithms used by all businesses to convert US prices into Canadian prices is a small line item called "uplift". It varies from as little as one or two percent into the double digits. That's the extra we pay, on top of our already higher taxes, for the privilege of living in Canada and buying goods here. When consumers shop across a border in order to obtain a better price, businesses refer to this as the "grey market". The challenge companies have when pricing products is to maximize the "uplift" without increasing the "grey market". That's called maximizing profits.
The car manufacturers have a grey market issue. So does every other industry out there. For example, I was pricing the new Panasonic TH-42PZ77U 42" plasma TV yesterday. It's $1,999 at BestBuy in Canada, and $1,499 at BestBuy in Watertown, NY — a two hour drive from my door. Or, I can buy it from a Florida company on EBay for $1,000 plus shipping. Most electronics are duty free, to boot. Where do you think I'm planning to buy my TV? I bought our new Sony HD camcorder in Florida last year too.
That's the nature of the market in an age where anyone can comparison shop for any product in any part of the globe. Suck it up Auto Manufacturers and give us a real break at home, rather than whining about the cost of doing business.
Oh, and by the way, if anybody in Oshawa is listening, I'll be in the market for a new car in the near future as well.