The hefty price increases slapped on Japanese cars in response to the rapid strengthening of the yen over the last few months have had virtually no effect on Japanese auto sales in the United States, industry executives and outside analysts said Wednesday.
Analysts also predicted that import sales won't lose their momentum even if, as expected, the major Japanese auto makers raise prices further in the next few months to cover more of the production cost disadvantage imposed upon them by the ongoing appreciation of the yen against the dollar.
The continued boom in Japanese car sales may signal defeat for the latest trade policy of the Reagan Administration, which has counted on international efforts to reduce the value of the dollar to help slash America's ballooning trade deficit.
While maintaining relatively open markets, the Administration has hoped that a weaker dollar and a stronger yen will make Japanese imports more expensive--and thus less attractive than domestic products--for American consumers to buy.
But in the auto market, at least, higher prices for Japanese cars have done little to deter consumers from buying. Despite the aggressive pricing moves by the importers, sales of Japanese cars, including imports sold by Chrysler and General Motors, were up about 12% in the first two months of 1986, and the Japanese are still selling virtually every car they can ship here. And, as long as quotas limiting Japanese imports remain in effect, analysts believe that pent-up demand for Japanese cars will remain unsatisfied, allowing the Japanese auto makers to raise prices almost at will.
"The most recent price hikes by the Japanese don't seem to have affected their sales at all," said Doug Shepard, an industry analyst with Ward's Research in Detroit.
"They still have room for more price hikes," added John Hammond, automotive analyst with Data Resources in Lexington, Mass. "And I think they have enough pent-up demand for their products to handle another round of price increases and still not hurt their sales," he noted.
Further Hikes Expected
Since December, all the major Japanese auto makers have raised prices by at least 4% to 5%, and analysts and Japanese industry executives agree that further price hikes will come soon to allow the Japanese auto makers to recoup more of the costs imposed by changing exchange rates.
The Japanese yen has appreciated about 30% against the U.S. dollar since last fall, when the major industrialized nations agreed to work jointly to push down the value of the dollar to help stabilize international trade patterns and reduce the debt burden confronting poor Third World nations.
Since most analysts expect the Japanese auto companies to pass on to consumers at least half of the higher costs that they incur due to the appreciation of the yen, analysts predict that the Japanese will have to raise prices another 10% or more from current levels to reach the 15% to 16% target (assuming the current exchange rate remains in effect indefinitely).
In fact, a second round of price hikes has already begun. Honda, which raised its prices an average of 4%, or $403, per car in December, led the way earlier this week when it announced that it was raising its prices again by an average of 3.59%, or $365, per car.
Both of those increases came on top of a 4.3% average jump in prices that Honda announced at the start of the 1986 model year last September.
Honda officials now estimate that their prices have risen a total of 10% since the start of the model year. But, while the company has experienced a slight increase in its inventories of unsold cars since its price hikes first went into effect, its sales remain strong, said Cliff Schmillen, Honda's executive vice president for U.S. sales.
On Tuesday, the company reported a 14.2% gain for February in its sales of Japanese-built cars. Sales of the cars it builds at its Ohio plant rose 9.7%.
Schmillen argues that Honda is still growing despite the fact that it no longer has a price advantage over the domestics.
"We haven't been price competitive for a couple of years," Schmillen said. "It's not a price advantage we have, it's a product advantage."
Outside analysts tend to agree that car buyers are not reluctant to pay more for a Japanese car than a comparable American model.
"Consumers are willing to pay an extra $1,000 to $1,500 for a Japanese car to get what they perceive is better quality," said Jack Kirnan, an analyst with Merrill Lynch Economics.
After watching the ease with which Honda has tacked on another price hike, the other big Japanese companies are not expected to be far behind. Toyota raised its prices by an average of 3%, or $269, in January (following a 1.3%, or $117, per car hike in September) and is likely to match Honda's latest jump.
"We're reviewing whether to increase our prices again in light of the yen-dollar situation," said Jerry Giaquinta, a spokesman for Toyota's U.S. sales arm. "We should have a decision soon."
Next week, Nissan will be introducing several new cars as early 1987 models and will take that opportunity to raise prices, industry sources said. In December, Nissan announced a 4%, or $409, per-car average price increase, following a 1.3%, or $164, price hike in September.
On some car lines, especially the larger models, the increases have already been dramatic. A Honda four-door Accord with automatic transmission, for instance, costs nearly $2,000 more today than it did a year ago, while the base price of a Honda Prelude with a five-speed manual transmission has jumped more than $1,000.
Still Offer Rebates
The base price on Nissan's sporty 300ZX has risen $1,100 to $17,499, while Toyota's Camry four-door compact now costs $9,678, up $730 from last year's $8,948.
So far, Detroit's auto makers have resisted the temptation of matching the Japanese price increases and in fact are still offering a variety of cash rebates and discount financing plans to attract customers. But analysts warn that the domestic firms will quickly lose sales if they try to exploit the appreciation in the yen by sneaking in some price hikes of their own later this year.
"There is a pent-up demand for Japanese cars that doesn't exist for domestic cars," said Kirnan. "If the domestics try to piggyback on the Japanese increases, their sales will suffer."