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Why Apple Products Are So Expensive Overseas

Why Apple Products Are So Expensive Overseas

We all know Apple is an American company and
enjoys making a large chunk of their revenue domestically. But Apple sells their products in many international
markets and even has retail stores in 24 foreign countries. Some of those markets, like Japan, have access
to Apple products at a price comparable to the US. For example an iPhone XS costs 112,800 yen
in Japan, which is about 1,058 USD. And when you consider the country’s 8% sales
tax is included in that price, it actually makes the iPhone XS about $20 cheaper than
in the US. Although this fluctuates depending on the
conversion rate. But not every country is lucky enough to pay
comparable prices for Apple products. To buy the base model iPhone XS, you’d have
to pay $1,235 in Mexico, $1,285 in India, $1,454 in Sweden, and $1,800 in Brazil. And these high prices have prompted customers
to fly to the US just to buy a new iPhone. So why exactly are Apple products so expensive
in these countries? Well, that’s exactly what we’re going
to find out today. This is Greg with Apple Explained and if you
want to help decide which topics I cover, make sure you’re subscribed and these voting
polls will show up in your mobile activity feed. So one of the biggest reasons why Apple products
are so expensive overseas is because of taxes. And the perfect example of this is the Value
Added Tax or VAT, which exists in over 140 countries around the world. But despite its prevalence, it isn’t something
that exists in the US. So let me explain how it works. In places like the European Union a VAT is
a consumption tax added to the price of goods and services. Products exported abroad aren’t typically
subject to the Value Added Tax, but imported goods, like Apple products, are. And depending on the country, prices of these
goods can increase up to 25%. And unlike the US, consumption taxes in most
countries abroad are included in a product’s retail price. So when you notice the iPhone XS selling for
$1,454 in Sweden compared to $1,000 in the US, that isn’t really a fair comparison,
since US prices don’t include local sales tax. Now if you’re doing the math, you’ll find
that iPhone prices in countries like Sweden still don’t add up. Because if their Value Added Tax is 25% on
a $1,000 phone, they should be paying $1,250. But instead, the iPhone XS is priced about
$200 higher. And that’s because taxes is just one part
of the complex equation companies like Apple use when calculating retail prices. Another factor to consider are any associated
costs with importation. Things like import duties, shipping, insurance
costs, and tariffs all contribute to price inflation when selling products overseas. India is a great example of this. They’ve enacted something called the Foreign
Direct Investment policy which punishes foreign companies who don’t source at least 30%
of their products components from Indian suppliers. And since Apple doesn’t meet that standard,
they’re restricted from opening retail stores in the country in addition to being hit with
a 20% tariff. There’s also an 11.4% custom duty on imported
products in addition to the Value Added Tax that we discussed earlier. And when you add all that up, it isn’t surprising
that customers in India pay a 28% premium for products like the iPhone. Now Apple is taking steps to not only price
their products more competitively in India but also to open their first retail store
in the country. I’ll talk about that in more detail near
the end of the video. Now you may imagine import costs only being
a factor in foreign markets, but they can also effect customers in the US. Recently President Trump planned to implement
a 10% tax on Chinese imports by September 1 which would effect tech companies like Apple. Now that deadline was pushed back to December
15th, but Tim Cook would like to see the tax eliminated altogether. In fact, he met with Trump this week and apparently
made a convincing argument since Trump told reporters, “Tim was talking to me about
tariffs and … he made a good case … that Samsung is their number one competitor and
Samsung is not paying tariffs. I thought he made a very compelling argument
so I’m thinking about it.” Now if the decision isn’t reversed and Apple
has to pay the 10% tax, they’d have to make a decision: Increase prices in the US by 10%,
or keep prices the same and allow their profit margin to take a major hit. Both of which are dangerous for the company. If Apple raises prices it would exacerbate
the issue of slowing of hardware sales, but if they allow their margins to fall 10%, it
would severely damage their profit potential. So depending on how this story plays out,
US customers made soon be feeling the effects of tariffs that foreign countries have been
dealing with for years. Something else that may contribute to high
prices are legally binding consumer guarantees that exist in places like the EU. For example, when you buy an Apple product
in the US, you receive a standard one year limited warranty that covers faulty parts,
product defects, or other conditions that the manufacturer is responsible for. But the problem is companies are free to define
their warranty terms as they see fit. That’s why only certain components may be
covered, or you may have to pay a fee to ship the product back to the manufacturer. And that’s exactly why the EU established
a consumer guarantee that offers customers much more protection than a standard warranty. Customers in the EU are entitled to a minimum
two year warranty in addition to the standard manufacturer’s warranty. And this adds quite a bit of liability for
companies like Apple who typically offset the risk by increasing the price of their
products. But when it comes to foreign markets, a major
concern is the volatility of each country’s currency. Just take the UK for example. When Brexit happened, there was a 19% drop
in the value of their currency compared to the dollar, which caught a lot of companies
off guard and caused them to quickly adjust their prices to keep pace with the UK’s
currency fluctuation. Apple understands which foreign markets are
most susceptible to this volatility and preemptively raises their prices. You can see this clearly with South Africa. Notice how the value of its currency has fluctuated
over the past five years compared to the EU, Australia, and Mexico. And that volatility is a major reason why
Apple inflates their product’s prices in South Africa beyond what’s typically seen
in other foreign markets. But in order to truly understand Apple’s
pricing overseas, we have to consider the American market. Because consumer behavior in the US can be
quite different than those in other regions, mainly because American society is very consumption-based. We have the most credit cards issued per capita
in the world, with each person charging an average of $4,000 annually. Compare this to other countries like the UK
or France, who opt instead for Debit Cards and therefore charge less than $300 on their
credit cards every year. You can see companies like Apple capitalizing
on America’s “buy now, pay later” mindset by offering monthly payment plans for their
products. And all of this amounts to US customers buying
a higher volume of products more frequently, allowing Apple to charge less than other countries
which don’t have a comparable level of consumerism. Now up to this point we’ve discussed pretty
concrete reasons why Apple prices their products higher in some foreign countries. But there’s one last factor I want to discuss
that’s less easy to prove with hard facts, and that is brand image. Apple is considered a premium brand in countries
like India where the average smartphone selling price is $200. So when it comes to the iPhone XS price of
$1,285, it makes sense that only the wealthy class in India could afford them. And if Apple knows their product will only
be accessible to the upper class, why not charge as much as you can? It’s an approach taken by many luxury clothing
brands, whose customers have no problem overspending on items that ultimately serve as a status
symbol. And you can find evidence of this when comparing
the iPhone’s price to other flagship smartphones. For example, the Galaxy S10 retails for $900
in the US, and $935 in India. An increase of just $35. The LG V40 retails for $900 in the US, and
$700 in India. That’s a discount of $200. And when you compare those prices to the iPhone’s
$285 premium in India, it supports the idea that Apple is simply extracting as much revenue
from customers in India as possible, since they know people with money with pay any price
for their premium phones anyway. It would also make sense then that iPhones
have only captured about one percent of India’s smartphone market, which is a shame considering
India’s sizable population. But Tim Cook has made it clear that Apple
has an aggressive plan to grow their presence in the region and make India one of their
biggest sources of revenue. It all started earlier this year when Foxconn
began trial runs of iPhone production in India, setting the foundation for Apple to one day
manufacture their smartphones in the region and satisfy the 30% local sourcing rule. This would allow Apple to avoid India’s
20% tariff in addition to opening their own retail stores in the country for the very
first time. In fact, Apple has already finalized a list
of several locations in the country where they might build their store. But they’re went a step further by saying
they’d overhaul the company’s relationship with independent retailers, and improve apps
and services aimed more closely at Indians. So while Apple is known for being a pricey
brand in the US, their products are typically even more expensive abroad. Perhaps they can take measures like those
in India to reduce their tax burden and drop prices, but it’s more likely that customers
in foreign markets will have to continue biting the bullet and shell out the extra money for
their favorite products. Although there is one product you can 75%-off
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see you next time.

33 thoughts on “Why Apple Products Are So Expensive Overseas”


  2. The Redmi Y3 and P30 Pro resemble an iPhone XS Max, but they seem convenient/practical, whereas the iPhone seems Gucci/fashionable. I held many phones in my hands before buying (Note 9, OnePlus 7 Pro, Mi 9) and the iPhone felt the best (I got the P30 Pro, mainly because of the price and 50x zoom).

  3. Fun Fact: HK used to sell Apple products the cheapest,only to be over taken in 2018.But some products are still cheaper than US while others more expensive.

  4. yeah the problem is not the price. The problem is the price relative to salary. In USA the iphone cost 999 BUT your monthly sarary is 1500+ dollars. In Greece the Iphone costs 900 euros BUT our sarari is from 500 euros (Most young people under 27) up to 700 euros. Do you get it? Our monthly Salary is LOWER, than the iPhones price. In some cases someones salary is half the iphones cost. So in Greece you need to work and save money for 6 to 9 months to get an iphone. Very nice. Thanks democracy

  5. yeah it fucking sucks buying apple stuff here in sweden…. but on the other hand, iphone is the most popular phone herre^

  6. in iran iPhone XS 64GB is about $1150 and it's illegal cuz apple doesn't sell in iran and the price changes every second !

  7. everything is expensive in Singapore. iPhone XS starts at like $1500. S10? also around the $1300-$1500 mark. oof

  8. Im from Denmark but bought my iPhone 6 Plus 64gb when I lived in San Francisco a month before moving back to Denmark. I saved about $200.

  9. Because apple dont have official Apple store in many country (example mine: Indonesia). They only have Authorized Apple Reseller (which they buy from Apple and sold at higher price because it’s a “2nd hand” new product)

  10. Some friends of mine went to the US and they asked me if I wanted something and I told them I wanted an Apple Watch (of course I paid for it). Initially I wanted it from the US as it was cheaper (about $50) but then I simply enjoyed the fact that’s from another country.

  11. IPhone X
    US price: $999
    UK (pounds sterling conversion): £813.47
    iPhone X
    UK Price: £999
    US (dollar conversion): $1226.71
    Apple and Europe EXPLAIN???!!!

  12. The “buy now pay later” mindset is what got us in the Great Depression…. (along with other stuff but still)

  13. In USA iPhone XS Max 512GB in gold which mine is $1442 us which equals $2137.84c back when it launched in Australia it was $2859 know its $2369

  14. But one thing that is cheaper in Australia then USA is the MacBook Pro I paid $4099 for it in Australia late last year in September and it’s worth $2799 USA top spec which I have and in conversion it equals $4150.92c that’s with out the sales tax I found out that look it up some things are cheaper in other countries when comes to Apple and another thing is that when there apple products are pre ordered Australia gets them first Australia is only 9 hours a lot off things are cheaper in America but Australia is very lucky most off the stuff like games and other things are cheaper then USA most off the time and it’s going to get dearer because trump and Australia and New Zealand and England actually pays more then most off the country’s in the world

  15. Give example it can cost up two $2500 Plus and up a year for rego yous go buy gallon and Australia goes buy liter lucky two get a hand full off groceries for $80 license costs houndreds a year and won’t even fill half a tank off fuel in a car in Australia with $80 nearly try double sometimes more I love America but people that play the victim say there dear try living in Australian New Zealand and England look at this the standard mustang GT is just over $35000 us and it’s almost double at $75000

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