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Europe Re-Importing European Cars from US

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Wall Street Journal

Europeans Go to U.S. Dealers

To Buy Cars From Home


June 12, 2008; Page B1

The weak dollar is drawing a new group of Europeans to shop in the U.S. -- for European cars.

More Europeans are turning to the U.S. to buy luxury cars, from Porsche 911s to Volvo 4x4s, and then shipping them back home. The cheap dollar and competitive pricing in the slow U.S. market can yield savings of as much as 30% of the cost of similar models in Europe, even after costs of transporting the cars and complying with different emissions standards.

Because cash-strapped Americans are shunning car showrooms, new clients should be good news for U.S. dealers. But the car makers, anxious to protect European margins that are often much fatter than those in the U.S., are fighting the trend, enforcing nonexport agreements in place for decades.

Reimports of used cars have surged the most. It is still hard to bring a new European car back to Europe. Approved U.S. dealers for most European brands that are caught selling new cars to be shipped back can face penalties or fines by the auto makers. And many European customers are reluctant to buy new cars from the U.S. because modifications needed to meet European road-safety and emissions requirements invalidate the U.S. warranties. The fact that cars were first registered overseas can also affect resale values in Europe, the companies say.

But reimports of "nearly new" cars are booming, hurting some dealers in Europe. U.S. dealers aren't fined for selling such cars for export, and many secondhand sales still are made by independent dealers, not franchise dealers, making it more difficult for auto makers to control the market.

"It didn't take long to figure out that shopping in the U.S. was a better deal," says Rolf Neugebauer, a 47-year-old German who in January bought three off-road vehicles from the U.S. for his tree-nursery business in the western German town of Neuhäusel.

He bought a year-old Volvo XC90 sport-utility vehicle for $36,000, a year-old XC70 for $27,000 and a two-year-old BMW X3 SUV for $27,000. He says he saved about €20,000 ($31,000) on the European purchase price of each car. Even after taxes, shipping costs and alterations to meet European standards, he estimates he saved 20% to 30% of what he would have paid to buy the cars in Germany. Mr. Neugebauer plans to buy more cars. "I can sell the cars at a profit in Europe, even after using them for a year," he says.

The buyers of these cars are mainly individuals, such as Mr. Neugebauer. Just how many used cars made by Porsche Automobil Holding SE, Daimler AG's Mercedes-Benz, BMW AG, Volkswagen AG and its Audi unit, and Ford Motor Co.'s Volvo are being reimported into Europe from the U.S. is hard to quantify, as there are no official statistics. Importers, auctioneers and vehicle modifiers, however, say the reimport business has never been this good. Specialists in shipping cars across the Atlantic say they are booked for months and are even turning customers away in some cases.

Imports of secondhand cars to Germany from other countries, including the U.S., were up 48% last year from 2006, according to VDA, the German automobile-industry lobby.

U.S. cars engineered to European standards, such as the Chrysler 300C, are also seeing a pickup in demand, though these are already available at competitive prices in European dealerships. But some U.S. cars not available through dealerships in Europe need emissions and safety testing to ensure they meet road-safety standards; an emissions test alone can cost as much as €15,000, wiping out any price advantage. European cars are engineered to European standards, so even if they require some modifications, they don't need such extensive testing.

Because the U.S. is a more competitive market, European manufacturers have for years been forced to lower the prices of cars they sell in the U.S. A Porsche Boxster, for example, costs about $46,000 in the U.S., while a car in Germany with equivalent specifications such as leather seats sells for about €52,800 ($82,000). The difference has widened as the dollar has lost about 18% of its value against the euro in the past two years.

At the same time, the price of secondhand cars has fallen dramatically in the U.S., especially over the past year, resulting in even lower prices when compared with equivalent vehicles in Europe.

"In the past year we've gone from selling 500 [secondhand] cars a month [from Canada and the U.S.] to overseas clients to about 2,000 a month today," says Dwight Grovum, a vice president at Toronto-based Akinvest Inc., which runs Exporttrader.com, a secondhand-car-auction site that caters only to clients outside the U.S. and Canada.

Exporttrader handles requests from Germany, Spain, Russia and Poland, among other countries, Mr. Grovum says. Demand in Eastern Europe has boomed with the economic growth in countries such as Russia and Poland. "Anything around the Baltic and places like Russia [that] are developing a middle class at the moment, that's good for us," he says.

Laureen Impex LLC of Newark, Del., is a smaller dealer that specializes in exporting more-expensive Porsche models from the Washington area via its ImportAuto-USA.com Web site. The company says it exports 26 to 30 cars to Europe each month, compared with five to 10 monthly deliveries two years ago. Florent Claudel, a sales manager who runs the Importauto-usa.com business, says customers are mainly from Belgium and France.

Mr. Neugebauer shipped his Volvo XC70, which he bought at an online auction, to Bremerhaven in northern Germany. There it was picked up by F.W. Kalkofen GbR, a business that specializes in modifying cars to European standards. Speedometers are adjusted to read in kilometers instead of miles, headlights are adjusted and engines undergo an emissions test. Basic modifications cost anywhere from €1,000 to €2,500, says 51-year-old owner Friedrich-Wilhelm Kalkofen.

Mr. Kalkofen, who also handles orders from outside Germany, says demand for the Porsche Cayenne SUV is so brisk that he designed a custom speedometer to help accelerate conversions to kilometers.

About 3,000 cars pass through his yard annually. So far this year, almost 40% are European, up from 30% last year, he says.

Competition for space on ships headed for Europe has increased, and delivery times have slowed because business is booming. It now takes four to eight weeks to ship a car over, compared with three to four weeks a year ago, Mr. Kalkofen says. "Times have never been better," he says, leaning against a dark-blue VW Passat Estate station wagon imported from the U.S.

Peter Kolb, president of Autoshipment International Group of Miami, says his firm has stopped accepting orders for cars to be shipped to Europe until the end of June "due to lack of space and overbooked vessels."

Under pressure from dealers in Europe, Mercedes-Benz will discuss how to clamp down on so-called gray-market exports of new cars at the company's dealer board meeting in Dallas in July. Werner Schumacher, of Schumacher European Ltd., says his firm was fined $15,000 last year because Daimler found out that some cars the Scottsdale, Ariz., Mercedes dealership sold ended up back in Europe.

Mr. Schumacher says he wouldn't knowingly sell a car to an exporter. "Dealers on the coast are smart enough to spot an exporter and refuse to sell them a vehicle," he says. "So exporters employ middlemen and have come deeper inland, to order cars from unsuspecting dealers."

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That's brilliant! The magic of the market.

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They can have their Volvo XC90s and Porsche CayennePepper4WDs.

It's the '69 Camaros, '36 Pontiacs, '59 Buicks and '61 Cadillacs that

make me sad when they leave our shores... not that I take major

offense to it, after all in some cases the cars have a better chance

at a long, unmolested & loving ownership.

I'm personally responsible for a 97% original & pretty solid '64 Olds

Super 88 Holiday getting sold/shipped over to the Netherlands. It

was a necessary evil so I could buy my '59 LeSabre.

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