Free Trade Agreements And Fluctuating Currency Rocks The Market

New car prices have been shifting substantially over the past few months, with many imports now cheaper than ever.

Australia’s South Korean Free Trade Agreement (FTA) officially came into effect on December 12, 2014, with the Japan-Australia Economic Partnership Agreement kicking off a little over a month later on January 15.

However, only one of these new Agreements has so far resulted in a slashing of new car prices and not all manufacturers are taking part. Other complex variables, including the strength of currency exchange rates, have had a major influence on the pricing strategy Australia’s auto importers are implementing in 2015.

Toyota, Mazda and Subaru have all made significant price cuts to the Japanese-built models in their line-ups.

Even though cars arriving from Japan now benefit from a five per cent reduction in import tariffs, it’s actually been the Japanese

Yen exchange rate (which continues to favour Australia) driving the greatest reduction in prices.

Australia’s top selling marque Toyota cut the price of ten of its models before the FTA even started, on January 1.

‘In support of our Dealers, Toyota has brought forward the price cuts to the start of the year – they were effective on January 1, a significant benefit for our customers,’ said Executive Director of Sales and Marketing, Tony Cramb.

‘Prices came down from the start of this year by around $800 on our most affordable Yaris range while some of our more expensive models have attracted reductions as high as $7630.’

Meanwhile over at Subaru, prices on some models have fallen even more dramatically.

Subaru recently slashed an incredible $14,000 from its range-topping Liberty – more than the drive-away price of a Suzuki Alto! Other Subaru models that benefit from major savings include the Outback, which has dropped in price by as much as $10,000.
On the other hand, some mainstream Japanese brands such as Honda and Mitsubishi have confirmed that their list-prices would not be dropping in 2015.

According to Product Communications Coordinator, Genevieve Kerin, Mitsubishi has been ‘preparing for the introduction of the Japanese Free Trade Agreement for some time’ with pre-emptive price adjustments made throughout 2014.

And in the case of Honda, most of the manufacturer’s cars sold in Oz are sourced from Thailand, meaning the Japanese FTA and weaker currency have little impact on its prices.

So what about Australia’s South Korean imports?

Hyundai, Kia and Holden – who between them import the bulk of Australia’s South-Korean offerings, anticipate little in the way of lowered prices.

Whilst the Japanese Yen has weakened, the Korean Won continues to strengthen against the Australian dollar, which has presented a challenge for brands like Hyundai Australia according to its Public Relations General Manager, Bill Thomas:

‘Exchange rate pressures have made trading very difficult – especially with the double whammy of a very strong Korean Won and relatively weak Japanese Yen. We are also faced with a strong Euro, so that affects our Czech-sourced vehicles, to which the Korea-Australia FTA obviously does not apply.’

Nevertheless, Thomas reassures that the company ‘will add extra features and technologies to updated models later in the year’ – whilst Holden Executive Director of Corporate Affairs, George Svigos is quick to remind that Holden already provides ‘some of the most competitive deals in the Australian market’.

Competitive is definitely the operative word here – and if one thing is for sure, competition will only increase in Australia’s new car market with these recent round of developments.

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