FIVE REASONS

Otago Daily Times, Issue 26542, 18 August 1947, Page 6

FIVE REASONS

THE COST OF A CAR • DOUBLE PRE-WAR FIGURE EARLY RELIEF UNLIKELY Because New Zealanders rank next to citizens of the United States as the owners of the greatest number of motor cars on a per capita basis in the world, car prices always are important news. For a long time to come, however, it would seem that car prices will not be good news. This information was gathered in the past week in Wellington from informed sources. With it was also gathered a series of reasons why costs have sky-rocketed since those pre-war days when £4OO bought a big car. Prices of cars will not come down while present costs provide such* an important factor in the composition of the selling figure. Many people have been waiting hopefully for better news before deciding to get the “old bus” repaired, repainted, and rfc-tyred, or to sell at tne present high level of used car prices and forgo the convenience and pleasure of owning a car for a year or so while waiting for prices to come down. Of course, there are many others who have long planned to buy a car and have waited through the war years with that goal in view. For these present-day prices have very often spelled disappointment, and they have now to decide whether to run the risk of buying a new car, when purchase to-day may result in the loss of hard-earned capital should prices fall later, or whether they should defer purchase for a time. Not a Few Pounds None of these would-be purchasers is thinking in terms of a few pounds or so. Some, of course, wishfully hope for a return to 1939 prices, but the majority have had in mind a figure ‘about midway between the 1939 figure and that of 1947. As 1939 figures were about half of presentday values it is obvious the majority hope for a reduction of about 25 per

cent, from existing price levels. Such hopes, according to those intimately connected with the motor car industry, are vain, and in expressing this view they postulate a number of reasons why this is so. They list five reason's for the greater sums now charged for cars—and it is worth noting that the reasons given are responsible for increases in the- costs of many other things which New Zealanders would like to buy. Those reasons are: Increase in wage rates; loss in production efficiency; more expensive designs, appointments and accessories; depreciation of the value of sterling in relation to the dollar; and increases in Customs duty and sales tax. In all countries wage 'rates are very much higher now than in 1939, and this applies not only to wages paid by motor car manufacturers in their own factories, but also to all labour employed in winning from the soil the raw products used in the manufacture of the materials from which parts, bodies, upholstery, batteries, etc., are made, to the labour used in transporting raw products,, materials and parts from country to country and factory to factory, and to the labour engaged in assembling, finishing and delivering the final product to the ultimate user. This added labour cost in the aggregate accounts for no small part of the total extra sum now charged for a motor car, and so long as wages are maintained at their present levels this part of the increase in car prices must remain. The likelihood of a wage rate reduction is, to say the least of it, remote. In point of fact, the trend is still upwards. The second item of extra cost is that arising from lower production efficiency. There is no doubt that civilian production output per man now is considerably less than the output per man in 1939. In 1946 it was estimated that output per man-hour was- down by 35 per cent, and more. The figures for 1947 are better, but there is still room for considerable improvement. One cause of this inefficiency is the high, percentage of totally untrained and inexperienced workers now engaged in all industry. As men become skilled in their new activities and as materials begin to return to an even basis of supply, a greater degree of production efficiency and a consequent lowering of costs can be expected. Whether it will be sufficient to overtake the effect of rising wage rates remains to be seen. Another factor of cost that maybe has been overlooked by the public in respect of certain makes of cars is the extra value built into current models as against 1939 models. In many cases the cars have a longer wheelbase, a roomier body, more luxurious appointments and new accessories. Naturally these improvements increase the selling price and that increase will remain. The depreciation of sterling in relation to the dollar affects the selling prices of all cars imported from the United States and Canada. The effect of this factor would be as much as £75 on any of the popular makes imported from these sources. It is possible that sterling will return to its old value in relation to the dollar—but not very likely in the near future. Effect of Taxation Last, and by no means least in importance, is the effect on prices of the increased amount of Customs duty and sales tax chargeable now compared with the sums payable in 1939. Customs duty is assessed as a percentage on the value of the article as sold on the market of the country of export, and any increase in the home market sale price, converted where necessary at current rate of exchange to sterling, means additional duty to be paid here, and, of course, an increase in selling price. Sales tax is even worse, for not only is it assessed on the ruling wholesale value of the vehicle in New Zealand but the rate of assessment has been increased from 5 per cent, to 20 per cent. By and large, it can be said wholesale values of cars have doubled since 1939, which means that the amount of sales tax collected on a car to-day is eight times as great as in 1939. The amount of sales tax payable to-day on a car in the low price group is about £IOO and proportionately more for the higher priced vehicles. This, together with Customs duty imposed, is an aspect of price that has no relation to industrial efficiency, economics, law of supply and demand, or any of the things that normally affect price, and so far as this item is concerned, only the Government can give relief. At the present time Customs duty and sales tax together amount to about 16 per cent, to 35 per cent., according to country of origin, of the total amount paid, by a buyer for his car.