Is the Exchange Rate Really Different?

[azstar]

I am by now means knowledgeable about this, but when I check the exchange rate from 1 year ago I get 1.85 and today I get 1.87. Ok, those two numbers are different, but they are not 7.5% different.

So, what gives? Has the value of the dollar really fallen from one year ago, or has it rebounded? The rate in September at the time of the first increase was about 1.78?

Doesn't make sense to me.

[Randy Chase]

Not unless you think everything happened right at the conclusion of the LA Auto Show. The original pricing was set way before that.

From my other post-



http://finance.yahoo.com/q/bc?s=GBPUSD=X&t=2y

Indicates that the pound was near 1.55 in early 2003 through early fall 2003. This is when a lot of the debates over the MSRP were being hashed out between Arnie and LCU... and Hethel. This did not happen overnight.

Everything was geared to an early 2003 release of the car. That did not happen and Fall, 2003 was looking more likely. And then the LA Auto Show at the end of 2003. Everything was being set into place. Literature, news releases. Everything goes through corporate legal, etc. Nothing happens with Lotus overnight. Really.

There was a huge amount of pressure from Hethel to increase MSRP, to bring it more in line with the UK pricing. Fighting that was Arnie who felt that $40k was an important line. So after a lot of debate, they settled on $39,985 as the magic "under $40k" number.

Again... that was around August/Sept 2003. Look at the graph. The pound starts climbing....

By the LA Auto Show and the formal release of the cars, the pound was almost $1.80. More discussion between Hethel and LCU about pricing. Arnie again fought to keep the car under $40k. Even if a lot of the margin came out of LCU's share.

Other than a small recent dip, the pound flirted with $1.95. I just wired over $4K to the UK and it was just under $2 a pound.

[biobaggie]

The historically 'accepted' exchange rate is usually GBP1.0 = USD1.5, and I would be surprised if Lotus used this to originally price the Elise. Obviously the exchange has declined considerably since then probably to a point where Lotus or Proton can't continue to absorb it any longer.

Also I don't think you can look at the same date in 2 consecutive years and look at the difference. You have to look at trends since the effects of currency fluctuations are not apparent immediately i.e there is always a time lag. If you look at the range over the past 12 months, it varies between 1.7479 - 1.9550. If you look back 2 years, which is when people started palcing their deposits then it is 1.5457 - 1.9550, which in my books is a significant change

edit: Randy beat me to it

[Paul MD]

There seems to be some anecdotal evidence that it was ultimately the pressure from Arnie to price sub $40k that lost him his job...

[fitfan]

Originally posted by Randy Chase
Not unless you think everything happened right at the conclusion of the LA Auto Show. The original pricing was set way before that.

Indicates that the pound was near 1.55 in early 2003 through early fall 2003. This is when a lot of the debates over the MSRP were being hashed out between Arnie and LCU... and Hethel. This did not happen overnight.

Everything was geared to an early 2003 release of the car. That did not happen and Fall, 2003 was looking more likely. And then the LA Auto Show at the end of 2003. Everything was being set into place. Literature, news releases. Everything goes through corporate legal, etc. Nothing happens with Lotus overnight. Really.

There was a huge amount of pressure from Hethel to increase MSRP, to bring it more in line with the UK pricing. Fighting that was Arnie who felt that $40k was an important line. So after a lot of debate, they settled on $39,985 as the magic "under $40k" number.

Again... that was around August/Sept 2003. Look at the graph. The pound starts climbing....

By the LA Auto Show and the formal release of the cars, the pound was almost $1.80. More discussion between Hethel and LCU about pricing. Arnie again fought to keep the car under $40k. Even if a lot of the margin came out of LCU's share.

Other than a small recent dip, the pound flirted with $1.95. I just wired over $4K to the UK and it was just under $2 a pound.

Randy, But do you really think that Lotus was sitting around trying to set an MSRP BEFORE sealing a deal with their banking?

I think its a bit futile to specualte that Lotus's "rate of exchange" was set on any particular date - unless someone can actually say "This is the truth" and very seriously doubt that information will ever be known.

Regardless, I think the issue with the 2k hike is that Lotus quoted me a price and a content based on my specification at order - if either of those change, its shows a lack of business ethics. I wouldn't by the car if it came with a 105 hp engine (to save money and keep the price same) and i won't buy it at a change in price from the deal Lotus quoted either.

Lotus - not the dealers, quoted prices, content, and specification at time of order.

[Randy Chase]

Originally posted by fitfan
Randy, But do you really think that Lotus was sitting around trying to set an MSRP BEFORE sealing a deal with their banking?

I think its a bit futile to specualte that Lotus's "rate of exchange" was set on any particular date - unless someone can actually say "This is the truth" and very seriously doubt that information will ever be known.

My main point was to counter the other raised data that the exchange rate when the car was announced was a certain number.

I think any reasonable person can see that the MSRP would have been set prior to the launch. They did not arrive at the LA Auto Show and go to Kinkos for the printing the night before. All the brochures and news releases were already done.

Now, the only question left then to speak to this point... is how far back was it decided? Does anyone really see Lotus moving that quickly? This was an issue that required corporate approval... from both LCU and Hethel and maybe also Proton. I highly doubt this was done a week before the LA Auto Show.

What little information I have been given directly from someone at Lotus, is that MSRP was a hot discussion item between Hethel and Arnie starting MUCH earlier... as in spring of 2003. That was what I was told. I have no reason to discount the validity of this, as compared to speculation.


Please note... I am not saying that any upset is not warranted... that Lotus did the right thing... that this was handled well... ETC. Not. I was only speaking to the one point... that it is not fair to say there is no validity to the change in exhange rate having an impact.

[grantcv]

Rather than complaining about the price increase, we should be grateful to Lotus for having tried so hard to keep the price reasonable. Compared to UK prices, we seem to get quite a deal. But, at the end of the day, Lotus can't be expected to lose money to satisfy our heart's content. If they did and went out of business doing that, then where would we be? They have to make money to survive, and I don't think they can be accused of making excessive profits - quite the contrary.

Personally, I paid over MSRP to get my car. My dealer even pointed out that I could wait for a later car at MSRP, but with the falling dollar, I probably wouldn't get the current MSRP anyway. While a sales tactic, it was true. And at the higher price, it is still a terrific deal.

[Miguel]

Only thing I know is that everytime I went to the ATM in Spain 300 euros cost me $412. I also had travellers checks but it was a pain to exchange them.

Last time I went 3 years ago 300 euros would cost me $273, a difference of $139.

In other words, for every Euro, i was paying 35 cents more. Europe wants the Euro strong so that gas is cheaper for them but in the other hand it's hurting their exports. It will level itself out but probably not for a year or so.

Note, England is not connected to the Euro, but it has the same tendencies as the other European countries in the exchange.

[DanH]

Europe wants the Euro strong so that gas is cheaper for them but in the other hand it's hurting their exports. It will level itself out but probably not for a year or so.

I don't think thats a very accurate assessment. Gas prices in Europe & the UK are intentionally high because the governments tax it so heavily. Whilst not wanting to get into a debate on this, I think there is a perception on this side of the atlantic that America is terribly wasteful of our fuel reserves with a general acceptance of massively inefficient engines, heavy cars (SUVs etc) & etc. We are encouraged to feel more guilty about such things, rightly or wrongly, and one way of bringing of encouraging change is to make fuel very expensive. If I remember a recent article correctly, we pay 8USD for a gallon of fuel here.