Value or price?

A number of importers have revealed how they will respond to the tariff reduction for imported passenger cars next month -- but Mitsubishi is not one of them.

The full-line importer, since the closure of its Tonsley Park plant in Adelaide, could follow in the footsteps of Honda and Mazda, both of which have said they are reducing prices in line with the tariff reduction to five per cent.

Alternatively, Mitsubishi could adopt the same stance as Subaru, which is unlikely to adjust pricing of its local product range .

But for the moment, Mitsubishi has nothing official to say. Head of Corporate Communications for the Adelaide-based company, Lenore Fletcher admitted that the company has something up its sleeve, but refrained from revealing what the 'something' might be.

"We don't want to alert out competitors to any activity we might be planning, but we certainly do have some plans in place -- and they will be revealed in January," she told the Carsales Network last week.

Fletcher's colleague and Vice President of Brand Management, Paul Unerkov, was almost as cryptic, but hinted that Mitsubishi might place an each-way bet.

"We'll do what we have to do... probably add a bit of spec -- a bit of pricing, a bit of spec as well," he said during the Challenger launch last week. If Mitsubishi's products come down in price to reflect the tariff reduction, it will be more as a response to South Korean importers than anything else.

According to Unerkov, the local economic situation favours Korean importers at the present, with the Won losing value against the Aussie dollar over the past several months.

"It's given the Koreans a huge free kick," he said.

"Look at Hyundai's results; it's helped them immensely. Good luck to them, they've taken advantage of the opportunity that's available to them."

Mitsubishi will be wary of price discounting as a response to the competition from the Korean rivals, since that hurt new-car sales of the company's locally-manufactured Magna in the past. Unerkov acknowledges that price discounting is not welcomed by dealers and can hurt used-car retained values.

"If you talk to dealers, they'll say if you drop the [price] it actually affects them significantly on their used cars and exposure to used cars," he said.

This is why Mitsubishi, based on its recent history, looks like it will complement 'adjusted' pricing with an enhanced specification in the aftermath of the new tariff regime.

Leaving aside resale values, price discounting must also be balanced against profitability. How would you neutralise the advantage the Korean importers enjoy, from lower labour costs and better exchange rates? Tactics like hedging or buying the cars in a different currency (Aussie dollar or US dollar) pose their own problems too, Unerkov explained.

"Can do [hedging], but you've gotta take the risk as well," he said. "That's the hard part, how do you know? You could get burnt very badly."

One way for Mitsubishi to compete on an even footing with the Koreans is to import more product from Thailand -- as Honda does -- but only the Challenger and the Triton are currently built there. All Mitsubishi's other Australian-delivered models are built in Japan.