Vehicles tend to be an interesting product as they can be categorized from necessity to luxury. The accessibility to cars also varied in each country throughout the times. My colleagues in Asia had told me that vehicles, especially foreign brands, would cost more in Asia than they would in the US. I have also read articles on how cars in Brazil can cost three times as much as they do in the states. I became curious in the reason. My first guess was that importing products has certain additional taxes on them, but as I stated, that was just a guess. Let’s take a dive into the topic and see why car prices differ across the world.
A Google search of “Why do cars cost more in Asia” yields this article from CNN. The article states, “Here, a car is more than just a tool—it’s an expensive treasure to be cherished.” It then mentions Singapore implemented government regulations on car sells in order to become a “car-lite” country. On surface, these reasons do make sense, but this is not a comprehensive analysis that we would have liked. Singapore is a small country with booming tourism industries and advanced public transportation, and cannot be used as the standard in our analysis of the world car prices.
Some Data I have compiled comparing world car prices
I wanted to try to compare prices for several car brands across countries. However, this data has been painfully difficult to find. I have compiled some data below. First is a chart of Volkswagen Golf 1.4 or similar provided by NationMaster.
This data was compiled by a survey conducted by numbeo.com.
Here is the same chart including Singapore:
Second is a chart comparing a higher priced car. We will choose the BMW 3 Series as our subject. We won’t step into the Lamborghini or Porsche territory. For these, I went onto BMW’s website to collect these prices. Then I converted all the currencies and plotted the following graph. The original prices in the original currency are as followings:
Germany: 35100 Euros, USA: 40250 Dollars, China 316,800 RMB, Brazil 169,950 Reals, Australia: 67900 Australian Dollars, South Africa 624,218 rands, Singapore: 169,000 Singapore Dollars.
And of course…. with Singapore:
Things to be wary of while interpreting this world car prices data
The data pulled off BMW’s website might only account for the base price of the car. Countries have their own tax laws that influence prices. One thing this data does tell us though is BMW itself isn’t selling cars for triple the price in Brazil.
Explaining the discrepancies
The prices for the Volkswagen Golf 1.4 or similar cars appeared to be consistent with the exception of Singapore. In the case of the BMW 3 Series, cars in Australia, Brazil, and South Africa cost about 12.5% more.
In the case of Australia, there is a 10% Goods and Services Tax, combined with protectionism on their domestic cars, roughly explains the raise in price. This article is an interesting one.
For Brazil, though, import duties, high margins and massive taxation drove the prices for autos way up. Forbes also noted “consumer naïvety” as a reason here. Many models of cars considered luxurious in Brazil would not be considered luxurious elsewhere, leading many brands to be way overpriced.
In the case of South Africa, high taxes on even domestically produced cars, combined with the fluctuations of the rand, their currency, drove the prices way up. The rand exchanged at about 12 for 1 US dollar in the beginning of 2019, and now it’s about 14 for 1 US dollar. This impacts the prices, especially of foreign goods.
Although in the data points, China does not show a strong deviation from Germany or the US, certain brands are still more expensive there. China has high taxes on imported goods and a high demand for prestige products. This will be certain to drive prices up.
As we can see, world car prices differ for many reasons, but none of the countries mentioned above is as extreme as Singapore.
The Special Case of Singapore
Singapore is an outlier. It is a completely wild datapoint. It is so for good reasons, though, because it is a truly unique case. There are government regulations on how many cars can be on the road at a time in Singapore. It’s a small, about 8000 people/km type of country. Without regulation, there would be dysfunctional traffic jams.
Of course, there are an abundance of taxes on cars in Singapore just like some of the other countries we have observed. What makes them different, however, is some costs that are unique to the country itself. You need to obtain a certificate of entitlement to be able to drive a car for 10 years. That certificate cost around 40,000 Singapore Dollars. There are also expensive dealer margins. This article breaks down the costs nicely.
Conclusion
The common reasons we found for the discrepancy in prices include:
- Import taxes
- Consumer perception of what is a “luxury good”
- Country-specific taxes that adversely impact the cost of buying a vehicle
- High demand
Of course, this is a vast topic. To fully have a complete perspective, we must have an understanding of different country’s economies and tax laws. We also must understand how different car companies operate in different countries and how they set prices.
Providing broad overviews can help us gain a perspective, though, and that is my intent here. Let me know your thoughts in the comments!