Golf GTI Mark VI Specifications and Prices

[Maverick]

My local dealer (NSW) has told me today that VGA will not be changing GTI pricing in response to the PMV tariff being cut from 10% to 5%.

The tariff reduction should equate to a 4.55% (not 5%) reduction in RRP (before ORC), as (110-105)/110 = 4.55%).

But if my dealer is correct, VGA is going to trouser the saving . . . at least for the time being.

Actually it should equate to 3% at retail level. It's based on the cost of the car from the factory.

[Corey_R]

Actually it should equate to 3% at retail level. It's based on the cost of the car from the factory.

What he said.

It wouldn't surprise me if VW pocketed the difference. Considering the rise in inflation and the increase in spec and the fact that VW have kept the car the same as the previous one.
But it'd be nice if they did give us a small price drop!

[Dubya]

Actually it should equate to 3% at retail level. It's based on the cost of the car from the factory.

Bollocks. And no figures to justify either, as usual. Just pure unsubstantiated supposition.

If the imported cost falls 4.55% (due to a 5% fall in duty) then all things being equal (ie importer and dealer margins being unchanged) the RRP should fall the same percentage (ORC excluded of course). If it doesn't, someone in the supply chain is making extra margin.

Just like if the factory cost fell 50% the retail price should fall by the same percentage.

Only in this case the drop is 4.55%, if you do the maths (which Maverick seems to have overlooked in my previous post).

Or is Maverick happy to only receive the dollar reduction in duty rather than the percentage to which consumers are rightly entitled (in which case 4.55% of the dutiable amount might only be 3% of the RRP) but what kind of anti-consumer sentiment is that?

[Swallowtail]

I'm getting a MkVI GTI to play with this weekend - Saturday to Monday... quite looking forward to it! No idea what spec it is or anything yet, will find out when I pick it up Saturday afternoon.

I'll take pics...

[Corey_R]

If the imported cost falls 4.55% (due to a 5% fall in duty) then all things being equal (ie importer and dealer margins being unchanged) the RRP should fall the same percentage (ORC excluded of course). If it doesn't, someone in the supply chain is making extra margin.

Just like if the factory cost fell 50% the retail price should fall by the same percentage.

Um no.... I'm sorry, your argument is completely flawed because you're forgetting all the costs of which come after a car is 'finished at the factory' and the costs of just 'doing business' .

The tax is on the cost of the car from THE FACTORY (in this case Germany). The import tax is not calculated on expenses like:
Shipping from Germany to Australia
Australian customs/compliance/other import levies and duties
Australian taxes (GST, LCT, Stamp Duties)
VW Dealer wages
VW Dealer realestate/running costs
Advertising, Administration etc etc.

ALL of these things, and more, go on top of the factory price of a car to give you the retail price of the car. So reducing the import tax on the factory price of a car by 5% is not going to reduce the retail price of the car by 5% !!

For example, here is the article one Mazda's price drops:
http://www.goauto.com.au/mellor/mell...25764C0080D2D0

As you will note, Mazda dropped the RETAIL price by 3% based on the reduction of import duties by 5%

There are plenty of other articles from different Automotive news sites already too. Please do your research first, especially before directly critising another site member.

[Maverick]

Bollocks. And no figures to justify either, as usual. Just pure unsubstantiated supposition.

Care to explain your statement?

Unlike you I took the time to understand how the duty operates before posting and it's not based on the retail price. Perhaps you can explain to us why the government figures are wrong, the motoring media are wrong, companies like Mazda are wrong and the industry organisations are wrong?

If the imported cost falls 4.55% (due to a 5% fall in duty) then all things being equal (ie importer and dealer margins being unchanged) the RRP should fall the same percentage (ORC excluded of course). If it doesn't, someone in the supply chain is making extra margin.

As coreying pointed out that's completely not true and what about the costs like

Shipping cost - is the ships captain going to take a 5% cut?
Transport - are the truck drivers going to take a 5% cut?
Staff - are the dealerships staff taking a 5% cut?
Advertising - does VW cut advertising by 5%?
Dealership rent - does the dealership cut it's rent payment by 5%?
Insurances - do the insurances along the way get cut by 5%?
Financing cost for the dealership - these have gone up substantially recently, perhaps they'll take a 5% cut as well?
Dealer Delivery Charge - perhaps we cut that by 5% as well?

Can you see all the charges along the way that won't change?

Just like if the factory cost fell 50% the retail price should fall by the same percentage.

Only in this case the drop is 4.55%, if you do the maths (which Maverick seems to have overlooked in my previous post).

You seem to be under some mistaken understand of how business operates, how taxes and duties work, how margins work and so forth. Many costs are fixed not variable and in case you hadn't noticed sales are down for many companies.

Or is Maverick happy to only receive the dollar reduction in duty rather than the percentage to which consumers are rightly entitled (in which case 4.55% of the dutiable amount might only be 3% of the RRP) but what kind of anti-consumer sentiment is that?

Consumers are entitled to nothing, Volkswagen don't have to pass this on.

Do you recall that you posted about the Mark 6 GTI being up 3.8% in Germany over the outgoing Mark 5? Perhaps VW took the hit for this year and have already kept the price down?

[pologti18t]

Do you recall that you posted about the Mark 6 GTI being up 3.8% in Germany over the outgoing Mark 5? Perhaps VW took the hit for this year and have already kept the price down?

Exactly correct... VW have probably already factored the duty change in to the new price.

The manufacturer can always increase the cars spec rather than decrease the price.

[EndlessMKI]

someone start a pic thread of recent purchase..........i'll be happy to perv at stocka's : )

[Dubya]

Um no.... I'm sorry, your argument is completely flawed because you're forgetting all the costs of which come after a car is 'finished at the factory' and the costs of just 'doing business' .

The tax is on the cost of the car from THE FACTORY (in this case Germany). The import tax is not calculated on expenses like:
Shipping from Germany to Australia
Australian customs/compliance/other import levies and duties
Australian taxes (GST, LCT, Stamp Duties)
VW Dealer wages
VW Dealer realestate/running costs
Advertising, Administration etc etc.

ALL of these things, and more, go on top of the factory price of a car to give you the retail price of the car. So reducing the import tax on the factory price of a car by 5% is not going to reduce the retail price of the car by 5% !!

For example, here is the article one Mazda's price drops:
http://www.goauto.com.au/mellor/mell...25764C0080D2D0

As you will note, Mazda dropped the RETAIL price by 3% based on the reduction of import duties by 5%

There are plenty of other articles from different Automotive news sites already too. Please do your research first, especially before directly critising another site member.

I don't now precisely how the dutiable value is determined, but I do know it has nothing to do with wholesale or retail prices and that transfer pricing arrangements (that often inflate landed costs to repatriate profits to the parent company) make this largely academic.

But I do know cost accounting and how a $1 increase in landed cost (be it due to costs of production or a tariff) can turn into a $1.50 increase in the retail outlet. And vice versa, all things being equal.

I agree, Coreying, nearly all of the costs that go towards the RRP come from the FACTORY. That's why when the cost of production goes up 3% the RRP invariably goes up by the same amount. VGA does not simply add 3% of the cost or production to the RRP - margin gets added at every stage resulting in a 3% increase in RRP. So I am not sure how that point supports your argument - although I do know sophistry when I see it.

I take your point about other VGA costs such as shipping to Australia, local haulage and compliance costs. But reseller overheads are not a factor in retail pricing (different dealers have different fixed costs for a start and these are paid out of margin - and dealer delivery which, along with all other ORCs, I expressly excluded from my remarks).

What Mazda did is a matter for them, but an importer that only passed on the actual dollar value of the import duty saving would probably only drop its RRP by 3% (assuming landed cost is ~65% of RRP).

My point is that an importer that passed on the full saving, after allowing for shipping, haulage and compliance costs, would pass on around 4.3% (as against the 4.55% the duty-included factory cost will fall as a result of a fall in import duty from 10% to 5%).

If the full benefit of the duty reduction is passed on, GST and LCT all ADD to the dollar value of the import duty saving, but not the percentage. And as I made quite clear in my post, I am referring to RRP before ORCs such as stamp duty, which you mention above, and which would reduce the percentage of the on-road retail price that the duty reduction represents, but not by very much. For example, imagine in the case of a particular VW car:


Item.............................................. ....Change...Saving%
Landed cost........$25,000.......$25,000
Duty......................10%............5%
Inc duty.............$27,500.......$26,250....-$1,250...-4.55%
Shipping..............$1,000.........$1,000
Haulage..................$250............$250
Compliance.............$250............$250
Importer's cost....$29,000........$27,750...-$1,250..-4.31%
Mark up..................15%.............15%
Wholesale...........$33,350........$31,913...-$1,438..-4.31%
GST.....................$3,335..........$3,191
Inc GST..............$36,685........$35,104...-$1,581..-4.31%
Mark-up..................12%.............12%
RRP....................$40,720........$38,965...-$1,755..-4.31%

Now these figures are only assumptions, but they are realistic and would have to be way, way out, in order to undermine the proposition that, as the factory cost of the car is around 94% of the importer's variable costs of importing each car, ~94% of the percentage reduction in import duty should be passed on (not just 65% of 4,55% (ie 3%) as Coreying and Maverick suggest - unless you want to line the importers' pockets more than if importers passed on the full benefit of the tariff cut).

As for the importer’s other, fixed costs, these overheads are recovered from the margin on each car sold, so using the above example:

Importer's margin......$4,350......$4,163......-$188

Similarly, the dealer recovers its overhead from its margin, but they also have the dealer delivery charge as well as the retail margin which, also from the above example, would be:

Dealer margin ex-GST.$3,669......$3,510......-$158

So if VGA simply passed on the dollar saving of $1,250 it made on each car in the above example, sure, that would equate to $1,250/$40,720 or, happily enough, 3.1% (which lends some credence to the assumptions in the example above).

As for Maverick and all of the charges he mentioned that are not going to fall by 5%, many of them (such as dealer overheads and VGA marketing costs) are not factors in RRP. As explained, overheads are paid from the aggregate margin earned on cars sold. And the marginal (eg shipping) costs he mentioned represent a very small percentage of the landed cost. Cost of goods sold (COGS), GP% targets and competitive forces are the predominant factors that determine RRP.

And as VGA's non-dutiable marginal costs of preparing a car for wholesaling are only about 6% of the total cost to VGA of supplying a car to a dealer, the percentage reduction in RRP (excl ORC) should be 94% of 4.55% (ie ~4.31%) unless:

- VGA has already factored in the reduction in duty in whole or in part (none of us knows); or

- VGA is planning on increasing the gross profit % on each vehicle sold.

I never suggested, implied or stated that import duty was calculated on the retail price, as Maverick suggested I did, but as duty is a direct cost its dollar value increases each time a mark-up or tax is added. That’s one reason why factory-fitted options are so expensive – VGA charges not the increase in its cost of production, it charges the increase in cost times the mark-up between factory, VGA and dealer.

So it works both ways:

If the duty were to go UP from 5% to 10% you'd find the $1,250 increase in duty payable would readily translate into an increase of $1,750 on the showroom floor, unless the importer or retailer absorbed some of the increase by reducing their gross profit %.

And Coreying, there are no "other import levies and duties" as you suggest, are there? You gotta be a bit factual, haven't you?

So yes, Maverick, 3% is all you should expect if the importer just knocks the dollar value of its tariff saving off the RRP (as Mazda appears to have done). But consumers should expect substantially (eg 50%) more than that if VGA reprices its products using the lower cost base from the outset (as the duty saving is increased each time the price is marked-up) and retains the same margin at each stage in the supply chain between importer and retailer.

I had already read the Mazda article and all it tells us is what Mazda did, not what the true effect on RRP should be, which is about 4.3%, ALL THINGS BEING EQUAL.

I am sure VGA is delighted to have apologists such as Maverick and Coreying going into bat for them (yet again in Maverick's case) with unhelpful anti-consumer sentiments.

While you're both welcome to your low expectations of what VGA can and should do in response to the tariff reductions, it would be more helpful if you could keep the misinformation you use to justify potential rorting by motor vehicle importers to yourselves.

And once again, Maverick, to be perfectly clear, 10% down to 5% equates to a 4.55% reduction in the duty-paid cost of a car on the dock, the difference between the two percentages being due to maths, not on account of the non-dutiable cost inputs VGA incurs (and which should lead to a reduction in RRP of around 4.3% if the full benefit is passed on at a retail level).

And of course, the higher the value of the car, the closer the percentage reduction in RRP should be to 4.55% (as non-dutiable cost inputs represent a decreasing proportion of unit cost as RRP increases).

[Dubya]

[QUOTE=Maverick;414414]

Do you recall that you posted about the Mark 6 GTI being up 3.8% in Germany over the outgoing Mark 5? Perhaps VW took the hit for this year and have already kept the price down?

Yes, but if you thought a bit more more or really "did your research" as you say you do you would have reflected on the more favourable AUD/Euro exchange rate compared with the rate when that comment was made.

Exactly correct... VW have probably already factored the duty change in to the new price.

I love the hyperbole - Maverick is not merely correct, he is "exactly correct". But either way, I refer you to the important exchange rate factor.

and even from Coreying:

Um no.... I'm sorry, your argument is completely flawed

not just flawed, it's "completely flawed" even though it's the pot calling the kettle black courtesy Coreying's fallacious arguments referencing dealership rent, wages and so on in a discussion about the potential flow-on benefits of a tariff reduction! How (completely) amazing!

And just before backing up Coreying's spurious reasoning Maverick pipes up that my comments are:

As coreying pointed out that's completely not true and what about the costs like

Shipping cost - is the ships captain going to take a 5% cut?
Transport - are the truck drivers going to take a 5% cut?
Staff - are the dealerships staff taking a 5% cut?
Advertising - does VW cut advertising by 5%?
Dealership rent - does the dealership cut it's rent payment by 5%?
Insurances - do the insurances along the way get cut by 5%?
Financing cost for the dealership - these have gone up substantially recently, perhaps they'll take a 5% cut as well?
Dealer Delivery Charge - perhaps we cut that by 5% as well?

Oh, how completely not true! Completely!! I mean how untrue could they be?!?!

But if Maverick paid attention he would have seen I was referring to the RRP excluding on-road costs such as dealer delivery.

And if he knew about business (as he suggests I do not) or cost accounting perhaps, he would know that dealership salaries and rent, and VGA advertising, do not factor in the setting of RRP.

Anyway, one can only put up with so much hyperbole and errant nonsense, as bemusing as it may be.