Apple Charges More Money For Its Products In Europe. Why?

It is no secret that Apple charges more money for its products in Europe as compared to the US. However, this was not always the case. Apple was charging both markets equivalently. But recently, Apple decided to increase prices for Europe and not the US.

Apple just announced its new iPad series yesterday (18.10.2022). Naturally, I was curious. When I checked the prices, it really made me think hard. The iPad retails at $799 in the US as opposed to €1049 in the EU (Germany). The iPad Pro goes for $1099 as opposed to €1449.

You can check across the board from iPhones to Macs, and this price difference seems to persist. The more accessories you add to your cart, the worse the difference seems.

So, why is there such a big difference in prices between the two regions? This made me dig into the matter, which resulted in this essay. Let me present to you what I have collected on this matter so far.

This essay is supported by Generatebg

The EU’s Economic Output

Unlike the American economy, the European economy is linked by the member nations of the European Union (EU). Some of these EU countries have had a rough economic time (to put it lightly) over the past years. On the other hand, some other EU nations have flourished.

On average though, the economic output of the EU-region has been slightly less healthy than the US, and this has reflected in the Euro-Dollar parity situation that we are facing now.

Some of the flourishing EU nations have expressed resistance to being weighed down by the poorly performing EU nations. Great Britain had enough at some point (amongst other political considerations) and left the EU in 2021 (known as Brexit).

COVID struck, and Britain did not get to a bright start with their newly gained “wings”. The British economy almost collapsed just a few days ago; that is telling. So, all in all, the EU-region seems to be lagging in economic output.

Don’t get me wrong; the entire world is struggling economically now, but the EU just a bit more than the US. So, can this be one of the reasons why Apple decided to increase prices in the EU and not the US?

Perhaps. We could certainly consider it as a factor. But there are also other factors we need to take into account.

Taxes and Warranties

In the EU, “Value Added Tax” (VAT) is a thing, whereas in the US it is not really the case. Germany, for instance, has a VAT of 19%, whereas, in the US, it varies from state to state around 10%.

But there are a few US states that offer 0% VAT. So, a US customer who wishes to save money could just purchase Apple products from those states. In the EU however, the choice is shallow. Some EU nations charge as high as 25% VAT. So, the EU price is naturally likely to be inflated.

Apart from taxes though, warranties are also a more serious thing in the EU. The US has more lenient warranty regulations than the EU. This in turn enables Apple to save more money per product sold in the US as compared to the EU.

So, considering all these factors, it really does seem justified that Apple decided to hike its prices in Europe. But what about outside the US and the EU?

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Apple Charges More Money for its Products Almost Everywhere

When I looked into the numbers, it almost immediately became clear that Apple charges more for its products almost everywhere. This is because Apple wishes to hedge currency risks of its various operating countries.

In simple terms, the more the value of a currency fluctuates, the higher Apple is likely to price its products in that country. Imagine if a country in which Apple operates went bankrupt overnight. The company still needs to ensure that it comes out on top in such a situation.

Every multi-national-corporation (MNC) does something known as “currency hedging” to counter the risk of losing money due to currency fluctuations. This point directly brings me to the next part of the discussion.

Apple Charges More Money for its Products in Europe. But What About Other Tech Giants?

Microsoft’s Xbox Series X retails at $499.99 in the US whereas it costs €499.99 in the EU (Germany). Sony’s PlayStation 5 (disc edition) retails at $499.99 in the US whereas it goes for €499.99 in the EU. Well, isn’t that interesting?

Perhaps it is a price disparity that just affects smartphones/tablets. You can get the Samsung Galaxy S22 (6.1 inches, unlocked, 256 GB version) for $799.99 in the US. In the EU, you can get the equivalent version for €839.00.

This is in stark contrast to what is going on in the Apple camp. Let me get this straight. All of the issues that I just discussed such as taxes, warranties, currency hedging challenges, inflation (which I did not discuss) etc., do indeed exist. But they exist for ALL of these multinational corporations.

Microsoft, Sony, and Samsung seem to have found a way to price their products equivalently in both the US and the EU, whereas Apple has chosen not to do so. What makes Apple so special?

Is Apple Playing a Fair Game in the EU?

In my humble opinion, the answer is NO! I have a feeling that Apple is trying its best to keep its profit margins. But it is choosing to do so by hiking prices in some regions and keeping the prices in others.

The truth is that if Apple hiked its prices in the US, it is likely to get smoked in the media for the move. But apparently, by hiking prices in the EU, Apple seems to get away with its profit margins without the bad media coverage; good for them.

Even though Apple has many technological advantages (such as its M2 chip), it is not worth the price to an informed customer outside the US. 

If you run the numbers, it might actually be cheaper to fly from the EU to the US, enjoy a short vacation, purchase an iPad, and still end up cheaper than the EU price (check out this fun Twitter thread).

When you consider all of that, something seems definitely off! I feel that it is unfair of Apple to sustain prices in one market by “taxing” other markets.

All things said and done, am I going to purchase the latest iPad or iPhone? Well, no thank you! And it is primarily because of Apple’s poor business practices.

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Further reading that might interest you:

• I Accidentally Almost Started A Business. Here Is What Happened.
• Startup Ideas: Is There Value In Ranking Creators?
• Ergodicity: The Hidden Reason For Society’s Growth And Your Misfortune.

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