How exchange rates have raised motorcycle prices recently
The EX250F was priced at $3000 for a long, long time. It was generally accepted that no one made much money at that price, but it's common practice for manufacturers or stores to price some products at or below cost, to try to get you to buy something else while you're there or come back in a couple years and get something more expensive. This is known as a loss leader.
When Kawasaki released the redesigned 250J in 2008, they added US$500 to the price, most likely to make a little money on it for a change, and to pay some of the development and tooling costs of the new design. Now, in August 2011, the price has climbed $700 more, to US$4200, not including dealer fees and stuff.
So, Kawasaki has a good-selling bike and is price gouging, right?
Nope. This has nothing to do with Kawasaki wanting to rip off the consumer. Rising prices in the past few years have nearly all been due to the change in the value of the Japanese Yen. In 2007, when Kawasaki was setting the price for the 2008, each US dollar was (and had been for years) worth about 115 Yen. Now in September 2011, it's down to 76. For Americans wanting to buy Japanese products, and Japanese companies wanting to sell things in the US, this is bad, bad, bad. To explain, here's Wes:
Price gouging? You need to understand money. Money is a relative thing. Foreign currencies are not expressed in terms of US dollars. You need to stop this American-centric thinking and look around your planet.....
Okay, so let's say you're an American with some skills and a bunch of tools. Every day you buy $100 worth of wood, work for 8 hours, and make a coffee table. You also use $20 worth of nails, screws, varnish, and stuff.
So, your total investment is $120 plus 8 hours work. You sell it in Canada for $250 CDN.
If the Canadian dollar is worth 95 cents US, you've sold that table for $237.50 US, netting you $117.50 for your 8 hours of work, so you're making $14.69 an hour.
Now, let's pretend that the world economy falls suddenly apart, a large number of Canadians lose their life savings through a billion-dollar Ponzi Scheme, most of the major Canadian banks fail, Canadians start losing their homes due to a sub-prime mortgage crisis, the sled-dog sector posts massive layoffs (affecting the parts industry and other critical markets), and the Canadian government prints an extra 7 billion Canadian dollars to bail out Bay Street... all while the Canadian Armed Forces wage a war in Iran and try to rebuild Pakistan.
This horrible turn of events causes the Canadian dollar to plummet. Now it is only worth 70 cents US.
If you sell your table in Canada for $250 CDN (the price last year), you will receive $175 US, but your costs are still the same in your local market: $120. So now your profit is $55, meaning you're only making $6.88 an hour.
What do you do? You raise your prices! You can't feed your kids on seven bucks an hour!
Working the math backwards, to make your same wage you now need to charge $339.29 CDN. So, you start charging $330 CDN for the same table you sold last year for $250 CDN.
Now: Is it reasonable for the Canadians to accuse you of price gouging?