Global Variations in Car Prices Reflect Differences in Import Fees, Taxes, Incentives

Global Variations in Car Prices Reflect Differences in Import Fees, Taxes, Incentives

By Scott Doggett May 21, 2010

Ever wonder why cars always seem to cost more in Europe?
 
A Bloomberg report distributed today answers that question with regard to pricing for the upcoming Nissan Leaf electric vehicle (pictured), which we recently reported will vary by more than $10,000 between the U.S. and some European countries.

The answer is that the differences in pricing reflects variations in import fees, taxes and incentives, Tom Smith, Nissan's chief marketing manager for European electric auto sales, told Bloomberg.

"If you just translate the U.S. price into euros, you seem to get a significant difference," Smith said this week in a phone interview from Nissan's headquarters in Yokohama, Japan. Excluding Europe's higher tax on the vehicle and an import duty that's four times that in the U.S., "we are priced at exactly the same level in both markets," he said.

The Leaf, powered by a lithium-ion battery pack, will go on sale in Japan and the U.S. this year and in Europe next year.

Nissan aims for the Leaf to compete in price with Toyota's gasoline-electric Prius and Honda's Civic Hybrid in the U.S. The vehicle qualifies for a $7,500 federal tax credit and may get an added $5,000 rebate in California, where large automakers are required to sell electric vehicles.

Nissan is factoring into the Leaf's American base price of $32,780 the longer-term impact of state and U.S. federal incentives it won to produce the Leaf at its Smyrna, Tennessee, plant and build a lithium-ion battery factory next to it, KG Duleep, who researches advanced auto technologies for consultant ICF International, told Bloomberg. Those incentives included a $1.6 billion low-cost federal loan won in 2009.

"When automakers price, they build in all aspects of capital costs over a multi-year period, and Nissan is getting a substantial amount of assistance," said Duleep. "There's probably some loss on the first few thousand cars, but perhaps by 2013 or so their costs might be at or below $30,000 a vehicle."

It took Toyota at least 10 years to make a profit on its Prius, which was introduced in 1997, when research, development and capital costs are included, Koji Endo, managing director at Advanced Research Japan in Tokyo, told Bloomberg. It may take Nissan about the same amount of time, he estimated.

Scott Doggett:  is an AutoObserver.com Associate Editor.