# Why are BMW's more expensive in Europe?



## northernlights (Aug 31, 2006)

I keep reading in different reports how BMW's model for model are much more expensive in Europe than the US. Could it be the case that Europe is subsidizing our NA bound BMW's? surely not...


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## dalekressin (Sep 3, 2008)

I suspect it has to do with volume purchases in the US.


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## M FUNF (Apr 2, 2008)

Euro prices are almost identical to dollar prices what costs 45K in dollars also costs 45K in Euros + VAT for the particular contry involved.


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## Grentz (May 16, 2009)

There is a lot of crazy accounting/taxes/etc. that goes on when doing business internationally at the scale companies like BMW do which can attribute to a lot of it as well.


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## hayden (Jun 6, 2006)

Many reasons I suspect. A few guesses:


Taxes. There is a more hefty tax on autos in Europe.
Volume. More people buying more cars.
Less competition in Europe (fewer Japanese cars, etc).
Higher turnover in the US market
Larger used car market... pushing prices of new cars down.
The situation with the dollar means that European brands are making even less now than they used to!


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## hayden (Jun 6, 2006)

M FUNF said:


> Euro prices are almost identical to dollar prices what costs 45K in dollars also costs 45K in Euros + VAT for the particular contry involved.


If that's true, that means Euro prices are about 50% higher... since the Euro is currently buying about 1.5 dollars.


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## Calif65GM (Mar 27, 2005)

M FUNF said:


> Euro prices are almost identical to dollar prices what costs 45K in dollars also costs 45K in Euros + VAT for the particular contry involved.


??? come again please. :dunno:


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## Tanning machine (Feb 21, 2002)

hayden said:


> [*]Volume. More people buying more cars.


That doesn't really make much sense, because for BMW the volume savings come in producing cars worldwide. The 3er produced in Germany for US export costs the same to produce as the 3er for Germany (with like equipment, etc.). Perhaps there are some extremely small savings if, for example, there's greater volume on US-spec taillights.

Where there may be a bunch of room for savings is in the dealer network. I have no idea, but US dealers may sell more cars per dealership, or have lower margins because of greater competition. But the wholesale cost shouldn't vary from country to country.


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## dalekressin (Sep 3, 2008)

Ohhh but it does vary a lot. An M3 in Switzerland is over 100,000 swiss francs and 70-80,000 dollars here.


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## hayden (Jun 6, 2006)

Tanning machine said:


> That doesn't really make much sense, because for BMW the volume savings come in producing cars worldwide. The 3er produced in Germany for US export costs the same to produce as the 3er for Germany (with like equipment, etc.). Perhaps there are some extremely small savings if, for example, there's greater volume on US-spec taillights.
> 
> Where there may be a bunch of room for savings is in the dealer network. I have no idea, but US dealers may sell more cars per dealership, or have lower margins because of greater competition. But the wholesale cost shouldn't vary from country to country.


Right. We're not discussing production costs... only why the sales price varies.

I mean to say that increased volume in one market (US) can result in more competitive pricing.


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## ProRail (May 31, 2006)

northernlights said:


> I keep reading in different reports how BMW's model for model are much more expensive in Europe than the US. Could it be the case that Europe is subsidizing our NA bound BMW's? surely not...


From what I've read here, they're cheaper in the US than anywhere else in the world. I think it's a marketing thing.


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## zoltrix (Mar 14, 2007)

this question is answered in the wiki.


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## b-y (Sep 14, 2004)

zoltrix said:


> this question is answered in the wiki.


The Wiki addresses two different US markets--dealer delivery and ED. The international pricing question is more complex. This thread from 2008 (in my not-so-humble opinion) does a good job of covering the issues.

In there last year, I believe we have a few new active 'Festers who are economists, accountants, and even foreign trade experts. They way want to add something. (Hint, hint!)


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## beewang (Dec 18, 2001)

Ahh!!!!  My favorite subject!!!:thumbup:


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## Andrew*Debbie (Jul 2, 2004)

northernlights said:


> I keep reading in different reports how BMW's model for model are much more expensive in Europe than the US. Could it be the case that Europe is subsidizing our NA bound BMW's? surely not...


*UK prices include taxes and fees*

Prices on bmw.co.uk are "on the road". They include VAT and the various license fees. Dealers don't charge much on top of this. The price on the website really is the out the door list price.

UK VAT is currently 15% but will be going back up to 17.5% in January. 
German MwSt. is somewhere around 19% :yikes:

BMWUSA prices are top of sticker and don't even include the destination charge. Add $1000 + sales tax to get an approximate on the road price.

*BMW AG makes less money on cars sold in America. *

The car market is segmented. Acura is not in the UK market. Lexus is here but they don't have the presence that BMW does. Nearest Lexus dealer is over an hour away from me.

BMW has to be aggressive on price if they want to sell cars in the US. BMW NA used to have a policy that favored units sold over per unit profit. This policy has changed. Lease rates aren't subsidized nearly as much and there has been a modest price increase.


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## Patrick (Dec 23, 2001)

Insane taxes (car taxes and VAT) in some countries, like Finland and Denmark, and then the skewed exchange rate between the Euro and US Dollar.

When new, my E61 530d Touring would have cost $127,000 USD. Thankfully, I bought it used for a paltry $80,190 USD.


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## tsoc88 (Jun 27, 2007)

*Pricing*

Also, unless it has changed, Europeans pay $500 for the ED experience.
We get it "Free" - plus a minimum 7% discount.


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## BMR2009 (Mar 20, 2009)

Currency fluctuations are hedged based upon a percent of expected sales to the US. They may hedge 60% of their expected sales in the domiciled currency, this smooths the fluctuation of revenues. In fact, many manufacturers even hedge currency on their suppliers. This is very common among international exporting companies.


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## zoltrix (Mar 14, 2007)

b-y said:


> The Wiki addresses two different US markets--dealer delivery and ED. The international pricing question is more complex. This thread from 2008 (in my not-so-humble opinion) does a good job of covering the issues.
> 
> In there last year, I believe we have a few new active 'Festers who are economists, accountants, and even foreign trade experts. They way want to add something. (Hint, hint!)


And *that thread* is linked to from the wiki. 

QED.


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## NetSpySD (Dec 28, 2007)

northernlights said:


> I keep reading in different reports how BMW's model for model are much more expensive in Europe than the US. Could it be the case that Europe is subsidizing our NA bound BMW's? surely not...


I think the tax burden in Europe is almost double the U.S. Free health care, drugs, etc. Someone has to pay for it.:dunno:

Gas is also triple.


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## M FUNF (Apr 2, 2008)

Calif65GM said:


> ??? come again please. :dunno:


The numbers are the same the values differ by the rate of exchange.


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## Andrew*Debbie (Jul 2, 2004)

NetSpySD said:


> I think the tax burden in Europe is almost double the U.S. Free health care, drugs, etc. Someone has to pay for it.:dunno:
> 
> Gas is also triple.


Here in the UK, consumption taxes like VAT are much higher than in the US. Payroll tax and deductions aren't bad at all. I take home more of my paycheck in the UK than I did in the states.

Fuel taxes are high and just went up another 2p/litre. I just paid £1.07/litre to fill up the MINI. That works out to about $6.58/gallon-US at the current exchange rate.

I could go on but that discussion belongs in Political Science not in ED.


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## DXK (Jun 1, 2007)

NetSpySD said:


> I think the tax burden in Europe is almost double the U.S. Free health care, drugs, etc. Someone has to pay for it.:dunno:
> 
> Gas is also triple.


Yeah, this is a common misconception; top tax rate in Germany is 45% and in France 40% (used to be higher, but the conservative governments in both countries have lowered it recently). In U.S., it's 35% + state + payroll and going higher in 2011. The corporate tax rate is lower in those countries than here. 
We don't have a VAT tax, but there is a talk about it due to the high deficits, also, the sate income taxes have been going up; my lease payment in MA just went up by $10 a month as a result of state tax increase.


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## northernlights (Aug 31, 2006)

zoltrix said:


> And *that thread* is linked to from the wiki.
> 
> QED.


Joy kill:thumbdwn:

I have deduced from the variety of answers that competition, taxes and currency issues all work in our favor. So you mean that more competition, lower taxes and a stable currency all help the individual(improved standard of living)! I knew capitalism still worked...


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## hayden (Jun 6, 2006)

DXK said:


> Yeah, this is a common misconception; top tax rate in Germany is 45% and in France 40% (used to be higher, but the conservative governments in both countries have lowered it recently). In U.S., it's 35% + state + payroll and going higher in 2011.


Are Europeans actually paying the full 40-45%? While I fall in the 35% federal bracket, my actual "effective" rate is more like 20% after deductions, etc. (+3.5% "effective" paid in California)


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## DXK (Jun 1, 2007)

hayden said:


> Are Europeans actually paying the full 40-45%? While I fall in the 35% federal bracket, my actual "effective" rate is more like 20% after deductions, etc. (+3.5% "effective" paid in California)


I am afraid I cannot answer that with any degree of authority since I never had my taxes done there. I do, however, know that there are similar types of deductions, i.e. family, kids, but I am not sure how they treat different sorts of loses, i.e. business, investments and the likes.


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## b-y (Sep 14, 2004)

hayden said:


> Are Europeans actually paying the full 40-45%? While I fall in the 35% federal bracket, my actual "effective" rate is more like 20% after deductions, etc. (+3.5% "effective" paid in California)


Their tax systems are very different from ours. In addition to VAT, there is also what we would consider a payroll tax. This then raises the question of "tax incidence"--who pays, the employer or the employee, and which parts you count. (For example, non-self-employed US workers pay half their social security and medicare taxes while the employer pays the other half. Which part(s) did you count in that marginal tax rate?)

To make this more concrete.... I asked the owner of a small-to-medium-sized winery in the Burgenland (Austria) how much she pays for taxes and benefits for the vineyard workers. Mostly the workers come from Hungary each day, but there is a tax and benefits agreement as both Austria and Hungary are now in the EU. Her reply was "It's not bad, I only pay 100%." I was astounded so I asked how that could be. It turns out she pays for their medical insurance and retirement contribution as well as a general payroll tax. Together these amount to approximately the same as the base pay. My guess is that most employees never calculate a tax payment with things such as W-2s, 1099s, Form 1040, and Schedule SE as we do here.


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## chaz58 (Sep 11, 2007)

Good answer.

I'm sure they lost $$$ on my car, but oh well. I paid 1/2 of what the car would cost in Germany. Then again, German price includes the 19% tax. Still, when I told people my car cost less than an Opel (Saturn) Astra, they were flabbergasted!

They aren't making tons of $$$ on German cars they sell here, but they do have to compete. To hedge, they make it up on cars they build in the US and ship to Europe. Why do you think there new german plants opening up in the US?



Andrew*Debbie said:


> *UK prices include taxes and fees*
> 
> Prices on bmw.co.uk are "on the road". They include VAT and the various license fees. Dealers don't charge much on top of this. The price on the website really is the out the door list price.
> 
> ...


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## chaz58 (Sep 11, 2007)

Yeah, last time I looked the taxes in Europe were about twice the US. It depends on children, marital staus, if you wife works, etc.

As mentioned above, US taxes are graduated, so my average tax is much less than my tax bracket (and about half of what Germany has).



DXK said:


> Yeah, this is a common misconception; top tax rate in Germany is 45% and in France 40% (used to be higher, but the conservative governments in both countries have lowered it recently). In U.S., it's 35% + state + payroll and going higher in 2011. The corporate tax rate is lower in those countries than here.
> We don't have a VAT tax, but there is a talk about it due to the high deficits, also, the sate income taxes have been going up; my lease payment in MA just went up by $10 a month as a result of state tax increase.


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## DXK (Jun 1, 2007)

chaz58 said:


> Yeah, last time I looked the taxes in Europe were about twice the US. It depends on children, marital staus, if you wife works, etc.
> 
> As mentioned above, US taxes are graduated, so my average tax is much less than my tax bracket (and about half of what Germany has).


I am not sure what you mean, but if you're making over $250,000 from a paycheck (not a small business), your take home pay in NY or Boston will not be much more than in Berlin or Munich. 
-----------------------------
BMW 550i will start at 55,000 euros in Germany + 19% tax.


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## werewolf (Jan 16, 2008)

Europe and the US take a different approach to taxes, benefits and consumption. The Europeans are more aggressive on sales / VAT to curb consumerism--i.e. you can get nice stuff but you really need to pay for it. 

Europe is also not one market (EU or no EU). The US has 300MM people to sell cars to but the biggest country in Europe by headcount is Germany with 80MM people so the ad campaigns / dealer networks have less volume to work with. I believe in Germany the concept of a car allowance / company car is more popular and accounts for a good portion of MB/BMW/Audi sales. As a result, the aggressive of pricing is less over there b/c there is less consumer demand to chase.

I think in a normal year US sales are 50% of global auto sales for luxury autos.


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