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Domestic vs. Import Price Gap Widens

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author photo by Jeffrey Archer October 2011

The price gap is widening between cars made in North America and those imported from overseas. According to the U.S. Bureau of Economic Analysis, the average selling price of an imported car is a staggering $7,000 higher than a domestically produced one - the widest divide in almost 12 years.

In August, the Bureau's figures indicate the average selling price for a foreign-built car was $31,516, compared to an average of just under $24,000 for a car built in North America. The delta, which amounts to nearly $7,700, represents the widest gap the Bureau has measured since December 1999. But for many industry observers, the figures aren't surprising.

A shortage of subcompact and compact Japanese cars is one reason why the widening price gap can be expected. Following the earthquake and tsunami that rocked Japan in March, many of the country's automakers were forced to slash production, leading to short supply. Because of the shortage of cars, consumers turned to domestically built models like the Ford Fiesta and Chevrolet Cruze, bringing down average selling prices.

A weak dollar can also be blamed for the price disparity. Because of the currency's slumping value - especially compared to the euro and Japanese yen - inexpensive cars carry very little profit if shipped from overseas. As a result, an increasing number of foreign automakers are producing their small cars in North America, disregarding higher labor costs to take advantage of the favorable exchange rates.

While an increased supply of Japanese cars will narrow the price gap, the figure also depends on the dollar's strength - a factor that's not likely to change in the near future. According to Bloomberg, the dollar has dropped to a post-World War II low against the yen and hit a 17-month low versus the euro. That means for the time being, today's less-expensive cars will continue to be produced domestically, while upscale models will mostly remain imports.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Domestic vs. Import Price Gap Widens - Autotrader