Toyota, Lexus, Saturn Increase Vehicle Prices : Autos: The rise may signal an end to a prolonged period in which heavy discounting makes for a buyer’s market.
The first in what stands to be a steady drumbeat of increases in the price of Japanese cars was announced Friday by market leader Toyota and its Lexus luxury-car division.
Toyota, in a move sure to be mimicked by other Japanese makers, said it was boosting prices an average of 3.2% or $432 per vehicle. Lexus slapped a 5% increase on its cars, a jump in one case of $2,100.
Also announcing a price increase was Saturn, the new small-car subsidiary of General Motors Corp. that is trying to take on the Japanese. But Saturn’s prices remain well below its Japanese competitors, analysts said.
The price hikes come amid rising U.S.-Japanese trade tension over U.S. inroads by Japanese cars, a continued increase in the value of the yen against the dollar and signs that the auto sales slump is turning around.
The confluence of those events is expected to put upward pressure on prices of both imported and domestic cars, ending a prolonged period in which heavy discounting made it a buyer’s market.
However, Detroit’s Big Three will face strong pressure from its supporters in Washington to resist the temptation to raise prices in lock-step with the Japanese--and instead to use price advantage to win back market share.
“The Big Three will be sending a very key strategic message” with their pricing actions in coming months, said Susan Jacobs of Jacobs Automotive Inc., a Little Falls, N.J., market forecasting firm.
Many industry observers contend that U.S. auto makers blew an opportunity during the 1980s to halt their loss of market share to the Japanese.
Rather than hold the line while Japan was boosting prices, the domestic industry raised prices and squandered its record profits on diversification into other businesses, the critics say.
A similar opportunity is presenting itself again, analysts say. But the U.S. industry is in dismal financial condition, having lost $6 billion last year, and will be tempted to do whatever it can to increase revenue.
Already in recent weeks, the size of rebates offered by Detroit’s Big Three has begun to decline on some car lines, though it has risen on others. The average discount offered by Ford Motor Co. has fallen to about $850 from $1,000 a car, Ford says.
Without raising sticker prices, auto makers can boost their revenue by weaning themselves from lavish rebate plans. Previous efforts to do so failed in the weak auto market, but a recent sales pickup should make it easier.
Meanwhile, Saturn is believed to have lost $700 million last year as it cranked up production more slowly than expected at its new Tennessee assembly plant. There will be pressure from its accountants to boost prices at any opportunity.
But analyst Jacobs said Saturn’s price increase--averaging 1.8%, or $220, effective March 1--is justified by its restraint since the line was launched in August, 1990. Saturn’s prices have significantly undercut such competition as the Honda Civic.
Including a first price increase last October, the base price on the cheapest Saturn will have climbed 5%, to $8,395, in 18 months. The priciest model, the SC, has climbed 1.7% to $11,975. Price increases on options will bring the price of an average-equipped Saturn to $12,423 from $12,203 last October.
Toyota and Lexus say the reason for their price increase, their third in a year, is the continuing climb of the Japanese yen against the dollar. However, Toyota’s action is also viewed as backing off from its aggressive stance in the U.S. market in response to pressure from the Japanese government, which in turn has been pressed by Washington to lower its $41-billion trade surplus with this country.
It remains to be seen whether higher prices will cut into sales. Japanese makers have been boosting prices more than Detroit the past year, Jacobs’ studies show, and gaining market share anyway.
By boosting prices again, they might continue to have their cake and eat it too--a happy situation at a time of declining earnings for Toyota and other Japanese makers back home.
With the latest Lexus price hike, its top-of-the-line LS400 will have jumped 16.6% to $44,300 in 15 months. Yet the past four months have seen record Lexus sales.
Toyota’s price increase, on the heels of a 3.9% hike in October, ranges from 2.8% to $7,198 on its base Tercel to 3.9% on its most expensive Supra, bringing the starting price of that sporty model to $30,570. When Toyota introduced its revamped 1992 Camry sedan last fall, the auto maker hiked the base price almost 18% to $14,368.
Auto stocks led the market Friday on growing investor belief that a car sales recovery is under way. GM rose $1.50 to $38.125, Ford leaped $1.875 to $37.125, and Chrysler gained $1.25 to $16.375.
Higher Sticker Prices Ahead
Toyota, Lexus and Saturn announced that they are boosting prices next month. The hikes come amid rising U.S.-Japanese trade tensions, a continued increase in the value of the yen against the dollar and signs that the auto sales slump is turning around. Analysts say other makers are almost sure to increase prices in coming weeks.
Toyota is hiking base prices on all its models an average of 3.2%, or $432 per vehicle, effective March 13.
Lexus prices will go up 5% on March 13; the cost of its flagship LS400 will be $44,300.
The base sticker price of a popularly equipped Saturn will go up 1.8%, to $12,423, on March 1.
