What’s the difference between a greenback and a Loonie? It’s only money, after all. And these days, one’s pretty much as good as another – unless you’re buying something with it …
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| The Loonie is now above the US d |
Take motorcycles, for instance.
Buy a base model Kawasaki Concours 14 in the States, and you’ll pay about $12,900 plus dealer charges. Get the same bike in Canada and you can expect to shell out that plus another $4,900, give or take. That’s nearly $5,000! For a metric speedometer and some French labels?
But is it really that simple? Are the OEMs (Original Equipment Manufacturers) just being slow to react when the exchange rates favour the consumer or is it a straightforward case of gouging while they can? Well, it depends on whom you talk to, and as with most things, the optics are never quite as clear as you’d hope.
Once you start digging around and asking the players what the deal is, it quickly becomes apparent that there’s not one single explanation. We asked several OEMs for their take on what is behind the price differentials.
As you’ll see, explanations vary, but generally follow some common themes, and the price differential can vary as well, from modest to alarming. The following article takes a look at what the differences actually are, what the OEMs are saying about it, the pros and cons involved with importing a bike yourself, and where all this might end …
THE PRICE GAP
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So just what is the difference between the U.S. and Canada when it comes to new bikes? We looked at list prices for some popular models from major manufacturers, and here’s what we found:
Who and why?
Okay, but just which companies should we look at and then which models do we pick? We could look at them all, but then there’s an awful lot of them and besides, quite a few have yet to release their 2008 pricing, which we need for our analysis.
To keep the list of models down we opted to pick one or two of the more popular bikes from each of the selected OEMs and then also look at their 2007 and 2008 pricing to see if adjustments were made for 2008.
An obvious start is the four main Japanese companies as theoretically they should all be facing the same issues and so should show roughly the same pricing variance. Any differences between them would therefore raise eyebrows.
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| Why spend more than you have to? |
We also thought that we needed to include some Europeans, so we picked Ducati and Triumph. What’s interesting with these is that Triumph is a Canadian subsidiary and arguably has less buying power than their U.S. counterpart, whereas Ducati is run out of the U.S. as part of Ducati North America – which sells its bikes in Canada as well – so buying power should not be a factor in price differences.
Finally, there’s Harley-Davidson, a U.S. manufacturer that should be somewhat immune from overseas import issues and so would reasonably be expected to more closely match Canadian prices to those in the U.S.
Note – for the sake of easy comparison, the exchange rate is assumed to be at parity (even though the Loonie is currently higher than the U.S. dollar). Also, all pricing shown is for 2008 models.
The big comparo
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| Ducati freeze prices but still have a 25% price differential. |
Ducati – Monster 695 (CA$9,995/US$7,995) and 1098 (CA$19,995/US$15,995)
Both bikes remain at 2007 pricing for 2008, but are still 25% higher than current U.S. prices. However, since American prices have increased on these models, the Canada-U.S. differential is down … slightly.
Triumph – Rocket III Touring (CA$19,999/US$16,699)
The British company’s new Rocket III Touring will cost $3,300 more in Canada. That’s a lot of money, but the price ratio, at 19.8%, is more modest than some. Prices have not been released for other models, but will be set very soon. Will they match the 20% differential?
Honda – CBR600RR (CA$12,499/US$9,599) and Gold Wing AD (CA$30,849/US$24,349)
Thanks to a freeze in Canadian pricing and a rise in the U.S., differential pricing has narrowed slightly in ‘08, with both the CBR600RR and the Gold Wing (airbag model) about 1.5% closer to American prices. Alas, there’s still a serious gap: a 30.2% difference for the CBR600RR and a 26.7% difference for the Wing.
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| KLR650 gets revamped and a slight hike, resulting in a 25% differential. |
Kawasaki – KLR650 (CA$6,599/US$5,349) and Concours 14 (CA$17,799/US$12,899)
The KLR650 dual-purpose bike – considerably revised for ’08 – is up $100 here but up $150 in the U.S. That makes it 23.4% more expensive here than in the U.S. (25% last year). However, that’s peanuts compared to the new Concours 14 which comes in a whopping 38% higher in Canada – the largest single price difference we’ve seen in this study!
Suzuki – DL650 V-Strom ABS (CA$8,999/US$7,199) and GSX-R1000 (CA$15,299/US$11,499)
The general purpose DL650 V-STROM lists at 25% more for a Canadian model. You’ll pay a suggested 33% more to buy the GSX-R1000 with a metric speedometer and a French accent. Canadian prices for the V-Strom with ABS drop $500 and for the GSX-R remain at ’07 levels, while the American Strom is static and their GSX-R is up $100.
Yamaha – YZF-R6 (CA$12,499/US$9,599) and XV1900 aider (CA$17,999/US$13,180)
The ’08 YZF-R6 is similar to Honda’s CBR600RR with a 30.2% premium for Canadians and like the Honda has not seen a price increase in 2008 despite being a new model. Since it went up in the U.S. the differential between the two countries has dropped from 34.4%. With their all-new XV1900 power cruiser, Company Y is testing the limits of customer credibility as the Canadian price soars 36.6% above its American counterpart.
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| 883 Sportster only 10% differential |
Harley-Davidson – 883 Sportster (CA$7,409/US$6,695) and FLHTC Electra Glide Classic (CA$20,819/US$18,695)
The Motor Company is the closest to U.S. pricing, which is what we’d expect. They’ve dropped their prices three times in recent months and it shows in year-to-year and country-to-country comparisons: the ‘08 883 Sportster is $770 cheaper than the ’07 Canadian model, whereas the FLHTC Electra Glide Classic is $1,710 less – that’s a 9.4% and 7.6% reduction respectively.
Despite this, there’s still roughly a 10% premium for Canadian bikes, though it’s a big improvement on the 24% difference on the 2007 pricing. U.S. price increases for ’08 contribute to this relative improvement.
What the OEMs say:
Okay, so there’s a big difference between U.S. and Canadian prices. It’s easy to shout rip-off, but what do the OEMs have to say about it all? (We also called the Motorcycle and Moped Industry Council (MMIC) – the industry body – for an overall opinion.)
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| Ducati N.A. says that Canadian pricing is set in Italy. |
Ducati – “Our price is based on the euro-Canadian dollar exchange.” In other words, they don’t look at the U.S. retail price and add dollars. Canadian prices are set by the Italian factory, even though Canadian Ducatis come from the U.S. distributor. And the smaller Canadian market does not affect pricing, says John Paolo Canton, PR coordinator for Ducati North America. “In fact, the Canadian market has been really good for us lately. Sales have increased.”
Ducati will honour warranties on U.S. bikes, but Canton points out that U.S. and Canadian bike specs are not the same.
Triumph – Triumph Canada gets its bikes from the U.S. importer, but that’s the end of it, says Triumph Canada boss Chris Ellis – costs are set by the British factory and affected by the Canadian dollar to British pound relationship, production time lags of a year or so, costs of doing business in Canada (“one of the biggest costs of motorcycles is transportation and freight, and the economy of scale for what it costs to bring units here”) and by what the British overlords figure the Canadian market will accept.
There is no specific surcharge for the smaller unit allotments to Canada, but fewer units imported spreads expenses more thickly on each slice of English toast.
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| Like Ducati, Triumph Canada says that pricing is set in Europe, but also cites time lags, freight and economies of scale. |
Triumph has a global warranty, so American bikes will be repaired here, and Ellis reminds us that the economic climate, like the weather, will continue to change. Sooner or later, “prices in America are going to have to rise,” he says. He advises those who contemplate buying a motorcycle in the U.S. to “make sure you know what your real savings are,” since other costs like gas, motel rooms, and food will be involved. “Caveat emptor,” … whatever that means.
Honda – “The difference in pricing is … because the American dollar is worth less,” says Kim Moore, PR coordinator for Honda Canada’s motorcycle division. “Our pricing isn’t too high; theirs is too low.” In other words, American companies are not raising prices in a manner consistent with the cost increases they suffer as the greenback declines.
But Honda Canada operates under a comparative cost penalty, too, as American Honda, buying many times more motorcycles than Honda Canada, gets a superior volume discount, Moore says. “Because we’re smaller in quantity, we pay more for our product when we buy it.” Another factor is time: importers order their bikes a year or so before their arrival; a year ago, a Loonie would buy about 105 yen, but today it’ll get you 115.
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| Honda looks forward to US prices going up, but offers incentives to Canadians until it does. |
Moore notes that a sharp reduction in motorcycle pricing could have some negative effects – recent buyers would not be happy, nor would those wishing to sell used bikes that have lost value compared to reduced-priced new models.
To keep Canadian buyers buying Canadian, Honda Canada is mounting an “aggressive new sales program” with an extended warranty and better financing. Buy in the States, Moore says, and financing will cost you a lot more. Honda Canada will not honour warranties on bikes purchased in the States by Canadian residents.
Kawasaki – Market size, lag times (prices were set a year or more ago), and Canadian geography and legislation all contribute to higher prices (which are set in Japan) for Kawasaki motorcycles, says Claude Gagnon, national sales manager.
Some prices were recently lowered and you can expect to see more of that, Gagnon says, though it will take time. He couldn’t say which models would become cheaper, but every model will be considered – including the devilishly expensive Concours 14 (“There are certain models that sort of escaped our grasp earlier in the year”), and the most
popular models were tackled first.
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| Kawasaki suggests that some prices will be adjusted. … Concours 14 … cough … |
The KLR 650, he notes, was significantly redesigned but only increased by $100 for ’08. There are also incentives such as accessory offers and lower financing rates.
Canadian Kawasaki will not honour warranties on bikes from the U.S., “although we still honour warranties for U.S. travellers who come up here (that’s common).”
Suzuki – Prices need to be adjusted, says Nathan Naslund at Suzuki Canada, “but that’s something that happens at the factory level.” As with other distributors, their costs are set by the manufacturer a year or so before models are released for sale. And Naslund echoes a common theme: that doing business in Canada is more expensive than in the U.S.
Pricing was discussed at the Suzuki dealer meeting and some incentives have been cut to make way for reduced dealer and retail prices. Naslund says the ’08 line includes “significant price adjustments with a lot of models,” up to around $2,600 on the M109R. For ’08, Canadians get some value-added options, like ABS brakes, on certain models.
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| M109R sees a price slashing. Other models get value add-ons. |
Naslund says Suzuki wants to narrow the gap to U.S. pricing levels and make the option of buying a bike in the U.S. “unattractive,” but that won’t be accomplished by punitive measures. Unlike some competitors, Suzuki Canada will provide warranty coverage for U.S.-purchased models, “provided the same model and model year vehicle is also sold by Suzuki Canada.”
Yamaha – Prices are set “to be competitive in Canada,” says Tim Kowall, VP of sales and marketing, and were negotiated with the Japanese factory last January. Economies of scale also come into play since there are fewer motorcycles sold here to absorb costs.
Yamaha Canada has adjusted prices on some cruisers, and is working on incentive programs to keep customers in Canada. “If you buy a YZ now you get a free PW50 (minibike),” Kowall says. “So we’re trying to bridge the gap. We know we need to do something.” Other incentives include reduced finance rates and cash-back deals.
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| At 36.6%, the new Raider is only just behind the Concours 14 for biggest price differential award. |
He’s going to Japan shortly to “try to get a long term North American pricing strategy put together,” and says matters such as the high Canadian premium on the XV1900 power cruiser will be addressed. “We’ll do what we have to do, and hopefully we’ll get some assistance from the factory.”
Right now, warranties are not honoured for U.S. bikes owned by Canadians, but Kowall plans on discussing that with Japan, as well, “because at the end of the day, they’re Yamaha customers.”
Harley-Davidson – Prices have just been lowered for the third time, bringing Harleys closer in line with U.S. prices than other makes. The Canadian distributor buys its bikes from the U.S. factory, so the price it offers to dealers reflects that, but Deeley Harley-Davidson Canada does adjust its pricing in order to remain competitive, says Breanna Gaudet, PR specialist with Deeley.
When queried more strenuously, Gaudet sent this response: “The Canadian marketplace is in a very volatile period for many economic factors including interest rates and currency exchange rates. However, Deeley Harley-Davidson Canada has clearly recognized the price disparity and continually assesses our Canadian prices and makes adjustments as required. We are firmly committed to our customers and our actions have clearly indicated this position.”
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| Harley Davidson keep dropping prices and as a result have the smallest price differentials. |
On the issue of warranty, “With Harley-Davidson motorcycles the warranty travels with the vehicle – whether it’s cross-border or not,” says Gaudet.
MMIC – While some companies are already making price adjustments, they will probably become more noticeable in the spring, says Bob Ramsay, president of the Motorcycle and Moped Industry Council, a nonprofit organization that serves the motorcycle industry in Canada. But production and buying lead times, differing Canadian requirements such as labelling, higher delivery and business costs, and specific currency valuations all contribute to pricing differentials.
And while the rotting U.S. housing market and other economic conditions south of the border force dealers there to keep prices low in order to sell motorcycles, Canadian prices are being pushed downward in order to compete with the foundering American economy, and everyone feels the pressure.
“It’s a tough situation for dealers, it’s a tough situation for consumers, and it’s a tough situation for manufacturers. No one knows where the Canadian dollar will be in six months’ time.”
IMPORTING FROM THE U.S.
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| “Y’all c’mon down now”. Photo:victoryofterrehaute.com |
So, you’re tempted by the big price differences and wonder just what are the advantages and disadvantages of taking a trip down to the U.S. and coming back with a new baby (motorcycle baby that is).
Pros
Save up to 40% on the price of a new bike! That’s enough innit?
Cons
Well you have to go and get it for starters. Not a biggie if you’re close to the border, but factor in time and travel costs to the equation.
Beware that a U.S dealer may actually refuse to sell you a bike. At least one OEM is instructing their U.S. dealers NOT to sell to Canadians! There have, however, been quite a few car OEMs doing that which has also prompted some discrimination law suits against the OEMs involved (see the CMG News).
If you need to finance the bike this could be tricky. It’s up to the individual finance company but they might not like the idea of the deal being done outside of Canada.
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| Get it past the border and you’re home free (well, with some savings anyway).Photo: Steve Thornton |
When you bring it back to the border, you’ve also got some paperwork to fill in, pay the GST (and PST if you’re in Quebec) and a $195 RIV (processing fee). Just don’t try to do this at the weekend as the office at the border will likely be closed.
Once across you’ll have to get an inspection done within 45 days (with any required compliance work to be done too).
You may also have a useless warranty. This one’s a bit murky as positions on warranties for U.S.-purchased bikes vary from company to company, but we have included that information with the companies that we profiled in this article.
You could be killing your local dealer. Yes, if they’re not selling any bikes then it’s a chunk out of their pockets. Of course, service work should still be good, although they might not get much warranty work …
For more information on importing a vehicle into Canada from the U.S., go to http://www.riv.ca/english/html/how_to_import.html
THE FUTURE ?
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| Some US dealerships have this kind of inventory!Photo: rentonmotorcycles.com |
Okay, we don’t have a crystal ball, but one thing’s for sure, this level of price differential can’t go on much longer. There’s a very good argument to be had that since it’s really the U.S. dollar that has taken a big fall and all other currencies remain more or less unchanged, it’s more a matter of the U.S. being overly cheap than Canada being overly expensive. Don’t forget, Canada is still one of the cheapest countries for motorcycles.
Many people expect a big correction in U.S. pricing to happen within the year, which would likely decimate the increasingly fragile U.S. motorcycle industry, but still not save the Canadian one from a very difficult year ahead.
A lot of Canadian dealers must be wondering what 2008 holds for them as this is hitting their pockets hardest. We recently talked to one dealer who had just decided to call it a day, in part thanks to the fact that the OEMs had failed to take advantage of the 2008 new model pricing and lower them to something closer than U.S. pricing. He argued that there’s little point in trying to sell a bike here when he could get the same bike in the U.S. at retail for less than what he has to pay here at dealer cost.
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| Some companies prefer to load up a bike with offers than cut the price. |
Also, when it’s relatively simple and cheap to import a vehicle yourself, there’s not much financial incentive to shop locally. Granted, some OEMs are using the “carrot” approach and pushing “value packages” with options and accessories, extended warranties, and special low financing rates. If that fails, then there’s also the “stick” by instructing U.S. dealers not to sell to Canadians and the non honouring of U.S. warranties in Canada. Question is, is this enough?
Ultimately, the consumer will decide, but one thing’s for sure, a 40% premium is guaranteed to send people south of the border for their next purchase. Also, any OEM that has raised the Canadian price of a bike over their 2007 listing has missed an opportunity to reduce the gap without adversely affecting the used market and current owners’ wrath. Indeed, a small price reduction would have been wise as well.
In our opinion, a 10 – 15% difference would probably keep most Canadians buying locally. Trouble is, there’s only one company in our survey that’s doing that: Harley Davidson, with a little over 10% price differential. The rest seem to be floating around the 25% mark with a few going considerably higher.
No matter what the explanations are, surely sales of the “40% bikes” within Canada will be slender at best. At this point we should mention that all the OEMs we talked with appeared to be very concerned about pricing differentials. They know their customers are not happy with the current situation – and neither are they. More than a few of them, we think, are going to work through 2008 with a bullet gripped in their teeth.
It’s going to be interesting to see how long the Canadian motorcycle industry will let things remain this way … and how long before we see our first grey-market dealerships springing up?
