
VW Cali
Guest User
With cable (GBP/USD) now below 1.30 a natural question is what happens to both used and new Cali prices.
Actually of course for UK residents it is the EUR/GBP exchange rate that matters.
Now one would hope - wishfully - that the worst of the exchange rate depreciation has come but that is not how currency markets operate. They do not operate linearly either, but overall there is significant potential for a much lower GBP in the next 12 months or so.
Against this are the serious economic problems in Europe, so two bad currencies competing may mean GBP does not do as badly against EUR as vs USD.
Now question is what will German car makers do with UK prices if GBP depreciates further. I know that they usually hedge with FX Forwards out to 1 year at least but with delivery of currency delayed out to 3 years. This would mean that they can likely hold prices for a year if they wanted. Some manufacturers buy options with delayed delivery, or in some case cases compound options with delayed delivery (options on options).
All these mean that prices need not be raised immediately.
Of course raising prices is not independent of the domestic market you sell in. If the domestic market is in recession it is not sensible to raise sticker prices. Now this would affect car makers as a whole across their whole range of models. Will GBP consumers see higher newer car prices due to significant reduction in exchange rate? My view is that it won't be so for 12 months or so especially if the economy is in recession. Indeed, there may even be better deals on offer. And probably are.....
Regarding VW Cali alone, I suspect given its limited numbers and very high profit margins for both dealers and VW, I doubt its new price will be reduced due to an economic downturn. On the other side, it may be held rather than increased even if exchange rate heads further south. However I would expect used values to become even firmer.
In general, after every economic downturn, the differential between new and used narrows. Calis are already the tightest such differentials I have ever seen, but most likely due to limited supply. If new Cali prices go up due to exchange rates, I exoect used Cali prices to respond.
This whole thing is kind of an interesting issue when one factors in relative economic perfornances of countries and regions, non trivial movements in exchange rates, how manufacturers hedge their exchange rate exposure, and domestic demand for a particular type of vehicle.
I also do not think staycations will have much of an effect on Camu prices. First, I do not expect staycations to increase by much because of exchange rates alone. These would increase only because of job insecurity in the UK (a palpable risk), or perhaps the general security situation abroad. But I don't see a direct impact on Cali demand domestically.
Overall, I feel that for the Cali on its own prices are going to stay firm, both new and used, for a while yet.
Actually of course for UK residents it is the EUR/GBP exchange rate that matters.
Now one would hope - wishfully - that the worst of the exchange rate depreciation has come but that is not how currency markets operate. They do not operate linearly either, but overall there is significant potential for a much lower GBP in the next 12 months or so.
Against this are the serious economic problems in Europe, so two bad currencies competing may mean GBP does not do as badly against EUR as vs USD.
Now question is what will German car makers do with UK prices if GBP depreciates further. I know that they usually hedge with FX Forwards out to 1 year at least but with delivery of currency delayed out to 3 years. This would mean that they can likely hold prices for a year if they wanted. Some manufacturers buy options with delayed delivery, or in some case cases compound options with delayed delivery (options on options).
All these mean that prices need not be raised immediately.
Of course raising prices is not independent of the domestic market you sell in. If the domestic market is in recession it is not sensible to raise sticker prices. Now this would affect car makers as a whole across their whole range of models. Will GBP consumers see higher newer car prices due to significant reduction in exchange rate? My view is that it won't be so for 12 months or so especially if the economy is in recession. Indeed, there may even be better deals on offer. And probably are.....
Regarding VW Cali alone, I suspect given its limited numbers and very high profit margins for both dealers and VW, I doubt its new price will be reduced due to an economic downturn. On the other side, it may be held rather than increased even if exchange rate heads further south. However I would expect used values to become even firmer.
In general, after every economic downturn, the differential between new and used narrows. Calis are already the tightest such differentials I have ever seen, but most likely due to limited supply. If new Cali prices go up due to exchange rates, I exoect used Cali prices to respond.
This whole thing is kind of an interesting issue when one factors in relative economic perfornances of countries and regions, non trivial movements in exchange rates, how manufacturers hedge their exchange rate exposure, and domestic demand for a particular type of vehicle.
I also do not think staycations will have much of an effect on Camu prices. First, I do not expect staycations to increase by much because of exchange rates alone. These would increase only because of job insecurity in the UK (a palpable risk), or perhaps the general security situation abroad. But I don't see a direct impact on Cali demand domestically.
Overall, I feel that for the Cali on its own prices are going to stay firm, both new and used, for a while yet.