Toyota facing tough decisions over vehicle prices

Sunday 29th June, 06:26 AM JST

TOKYO —

Toyota Motor Corp is facing tough decisions on whether to raise its vehicle prices in Japan amid the combination of higher costs and slumping demand. The leading Japanese automaker hopes to avoid raising prices in the sluggish domestic market. But materials price increases exceed levels that Toyota can absorb through its own efforts, President Katsuaki Watanabe said.

Higher costs for steel and other materials are expected to drag down Toyota’s operating profit by over 300 billion yen in the year ending in March 2009.

The company has already agreed with Nippon Steel Corp on a steel sheet price increase of over 30%. It is also under pressure to accept price hike requests from makers of glass and other materials.

Toyota is considering the possibility of passing on the higher costs in retail prices for new models or raising the prices of all models. Price increases covering all models would be the first since 1974.

Rival automakers are closely watching Toyota’s moves.

Nissan Motor Co President Carlos Ghosn said the industry leader should be the first to make a decision.

But Toyota remains cautious due to concerns that price hikes appear certain to put a damper on its domestic sales. Foreign exchange rates that move in favor of Toyota make the situation more complex.

Toyota can gain a profit of some 280 billion yen in the year if exchange rates remain at current levels. The company assumes an exchange rate of 100 yen to the dollar for the year, compared with around 107 yen at present.

Consumers may backlash if Toyota raises prices under such favorable conditions, industry watchers said.

JCN

8 Comments

Sarge at 12:32 PM JST - 29th June

"slumping demand"

Toyota makes some fine cars, but they still use gas.
knucklerap at 06:08 PM JST - 29th June

"slumping demand"

Automobile sales in Japan fell 6.1% in May compared with the same month in 2007, according to the Japanese Automobile Dealers Association (JADA). JADA blamed the fall on having one fewer selling day in the month compared with last year and on April's sales being boosted by tax changes. Sales by Toyota fell 2.8% while Nissan sales were down by 11.4%, but Honda managed a 5.1% rise.
noborito at 08:58 PM JST - 29th June

record gas prices combined with record car prices (Japan has never really had cheap cars. People here actually pay sticker price.) Way to go Toyota. Way to keep your customers happy.
bushlover at 09:22 PM JST - 29th June

I know people who have chosen Korean cars over Japanese cars simply due to the fact that they are cheaper and have better warranties. Japan can't see this so will suffer from smaller car sales in N. America too despite having a good rep there. My friend chose a Hyundai Elantra over the smaller Toyota Yaris due to this fact.
westurn at 11:31 AM JST - 30th June

"Toyota Motor Corp is facing tough decisions..."

Yeh, like when to give up the ship ! I'll say it again... if you are in the automobile industry you are in for a world of hurt over the next 5-10 years ! Oil and gas prices are not coming down, this alone will curb future, so called promising, markets in the BRICS. As for the nation of Japan, wow, another typhoon of bad economic news about to hit the shores ! Batten down the hatches, yer in for a wild one !
freakashow at 01:31 AM JST - 2nd July

http://autos.yahoo.com/articles/autoscontentlandingpages/593/hardest-to-get-cars/;ylt=Aof0OedvjOP1Es1r.tSfNiQazJV4
westurn at 12:32 PM JST - 2nd July

Hmm, more tough decisions... like how to win back American consumers after being taken over by GM ! See todays JT for more details !
freakashow at 08:47 PM JST - 2nd July

http://news.yahoo.com/s/ap/20080702/aponbige/autosales;_ylt=AsQDd3qOkZ8yV63QHTg4653N67EF

June sales at GM had a still-dramatic drop of about 18 percent, as the overall market fell 18.3 percent, according to Autodata Corp.

Only Honda, whose lineup is tilted toward smaller and more fuel-efficient cars, reported a sales increase for June — slightly over 1 percent. Honda car sales were up nearly 20 percent, truck sales down 24 percent.