Toyota Mulls Price Hikes As Costs Soar

By dancurranjr On August 24th, 2008

Toyota Motor Corp. said Wednesday that it was considering raising its prices in response to soaring material costs, following a report that it is preparing to announce hikes in Japan for next month.

According to the Nikkei business daily, Japan’s top automaker has began notifying affiliated dealerships of the planned price increases.It would be the first time since 1974 that the auto giant has raised the domestic prices of existing passenger vehicles, rather than waiting for the launch of new models, the newspaper said.

The increases of between one and three percent are likely to apply to vehicles most affected by rising steel and raw metal prices, such as the Prius hybrid and the Dyna truck, the report said without naming any sources.

The price of iron ore, a vital material to make steel, has soared in recent years due to rising demand, particularly in fast-growing China and India.”We are aware of the current situation of higher raw materials prices,” said Toyota spokesman Hideaki Homma.

He said senior Toyota officials are mulling whether to raise domestic prices in response to soaring material costs although no decision has yet been made.

Nissan, Japan’s third largest automaker, has indicated that it is waiting for market leader Toyota to raise vehicle prices before it follows suit.Toyota is a pioneer in hybrid vehicles, which reduce fuel consumption by switching between a regular engine and an electric motor.

The Prius line enjoys significant success in the global hybrid market so a price hike would be unlikely to affect sales significantly, analysts said.A price rise for commercial trucks may have to be shouldered by vehicle dealers if they are to avoid losing business, they added.

Some company watchers warned that the financial benefits of a price hike were likely to be limited and could deter buyers.”I am not sure if this is the risk worth taking,” said one auto analyst at a Japanese brokerage house, who declined to be named. The surging raw material costs come as rocketing fuel prices and a weak economy weigh on Japanese automakers’ sales, particularly of trucks and sports utility vehicles in the United States.

Japan’s auto market is also in a slump, depressed by weak consumer spending, a shrinking population and signs that younger Japanese are losing interest in cars, particularly in big cities.

Source: AFP

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