The Benefits of the Strong U.S. Dollar and Car Imports

 

With the U.S. Dollar extremely strong right now, a position which doesn’t look to change, many auto manufacturers have reaped the benefits in the extra demand for their cars, in which the cost to create each one has also dropped partly due to crude prices that have also fallen.    

Of course, this is mainly something that has benefited auto manufacturers in countries in Europe, as well as Japan and South Korea.

A strong dollar compared to the euro, the Japanese yen, and the South Korean won has resulted in the United States being viewed as a much more attractive place to sell vehicles to take advantage of the situation.

Unfortunately, this caused some of the auto manufacturers in the United States, particularly those in the luxury car and compact sport-utility market, to face increasing pressure from foreign imports creeping up on their market share.

In Germany, the three largest auto manufacturers there, including Daimler AG, will see a rise in their earnings of around $14.2 billion according to projections in 2015, just to give an example.

Why the Dollar Will Remain Strong

Since the second half of 2014, the dollar has risen against the yen and the euro by a whopping 15  percent. Against the South Korean won, it has risen a less, but still relatively high, 6 percent. This coming year, the U.S. Federal Reserve has strongly hinted at wanting to raise interest rates. At the same time, the European Central Bank will begin moving in the opposite direction, with things remaining the same in Japan and in South Korea.


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How This Benefits Consumers in the United States

In order to take advantage of this opportunity in the United States market while they still can, many foreign auto makers are increasing the number of exports that are being sent. In order to make sure that U.S. consumers have an incentive to buy them, they are adding significantly higher sales incentives and are including more standard features that were once only options, such as backup cameras.

Now, U.S. companies, such as General Motors, are offering better deals than ever so that they can compete with their foreign rivals.

Foreign Companies Will Benefit No Matter What

Even though many auto manufacturers have hedged themselves against shifts in currency exchange rates, companies whose parent company is based abroad will still benefit significantly.

Mercedes-Benz USA, which imports around 35% of its sold vehicles from its parent company, Daimler AG, in Germany, as well as Toyota Motor Corp in the United States, which imports 29% of its car sales from Japan, will see an increase in profit from the better margins due to the shift in currency exchange. In addition, many of these parent companies are planning to increase the level of production of vehicles made in the United States, since that will benefit all parties involved.

Many of the foreign companies have also increased the amount of sales incentives that they allow their U.S. branches to offer.

Now is a better time than ever for U.S. consumers to purchase a vehicle, as companies based in the United States and abroad are both offering more incentives and better prices, as competition is now extremely high!

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