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Weak dollar makes Europeans buy American cars

Tue., June 17, 2008

The weak dollar is drawing a new group of Europeans to shop in the U.S. — for European cars. More Europeans are turning to the U.S. to buy luxury cars, from Porsche 911s to Volvo 4x4s, and shipping them back home. The cheap dollar and competitive pricing in the slow U.S. market can yield savings of as much as 30 percent of the cost of similar models in Europe, even after costs of transporting the cars and complying with different emissions standards.

Because cash-strapped Americans are shunning showrooms, new clients should be good news for U.S. dealers. But carmakers, anxious to protect European margins that are often much fatter than those in the U.S., are fighting the trend, enforcing non-export agreements in place for decades.

Re-imports of used cars have surged the most. It is still hard to bring a new European car back to Europe. Approved U.S. dealers for most European brands caught selling new cars to be shipped back can face penalties or fines by the automakers.

But re-imports of “nearly new” cars are booming, hurting some dealers in Europe. U.S. dealers aren’t fined for selling such cars for export, and many secondhand sales still are made by independent, not franchise, dealers, making it more difficult for automakers to control the market.

“It didn’t take long to figure out that shopping in the U.S. was a better deal,” said Rolf Neugebauer, a 47-year-old German who in January bought three off-road vehicles from the U.S. for his tree nursery business in the western German town of Neuhausel.

He bought a year-old Volvo XC90 sport-utility vehicle for $36,000, a year-old XC70 for $27,000 and a 2-year-old BMW X3 SUV for $27,000. He said he saved about 20,000 euros ($31,000) on the European purchase price of each car. Even after taxes, shipping costs and alterations to meet European standards, he estimates he saved 20 percent to 30 percent of what he would have paid to buy the cars in Germany.

Neugebauer plans to buy more cars. “I can sell the cars at a profit in Europe, even after using them for a year,” he said.

The buyers of these cars are mainly individuals. Just how many used cars made by Porsche Automobil Holding SE, Daimler AG’s Mercedes-Benz, BMW AG, Volkswagen AG and its Audi unit, and Ford Motor Co.’s Volvo are being re-imported into Europe from the U.S. is hard to quantify, as there are no official statistics.

Importers, auctioneers and vehicle modifiers, however, say the re-import business has never been this good. Specialists in shipping cars across the Atlantic say they are booked for months and are even turning customers away in some cases.

Imports of secondhand cars to Germany from other countries, including the U.S., were up 48 percent last year from 2006, according to VDA, the German automobile-industry lobby.

U.S. cars engineered to European standards, such as the Chrysler 300C, are also seeing a pickup in demand, though these are already available at competitive prices in European dealerships. But some U.S. cars not available through dealerships in Europe need emissions and safety testing to ensure they meet road-safety standards; an emissions test alone can cost as much as 15,000 euros, wiping out any price advantage. European cars are engineered to European standards, so even if they require some modifications, they don’t need such extensive testing.

Because the U.S. is a more competitive market, European manufacturers have for years been forced to lower the prices of cars they sell in the U.S. A Porsche Boxster, for example, costs about $46,000 in the U.S., while a car in Germany with equivalent specifications such as leather seats sells for about 52,800 euros ($82,000). The difference has widened as the dollar has lost about 18 percent of its value against the euro in the past two years.

At the same time, the price of secondhand cars has fallen dramatically in the U.S., especially over the past year, resulting in even lower prices when compared with equivalent vehicles in Europe.

“In the past year we’ve gone from selling 500 (secondhand) cars a month (from Canada and the U.S.) to overseas clients, to about 2,000 a month today,” said Dwight Grovum, a vice president at Toronto-based Akinvest Inc., which runs, a secondhand-car-auction site that caters only to clients outside the U.S. and Canada.

Competition for space on ships headed for Europe has increased, and delivery times have slowed because business is booming. It now takes four to eight weeks to ship a car over, compared with three to four weeks a year ago, said Friedrich-Wilhelm Kalkofen, who modifies cars to European standards.

“Times have never been better,” Kalkofen said, leaning against a dark-blue VW Passat Estate station wagon imported from the U.S.


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