Toyota Is Planning Price Hikes, Still Deciding How High to Go

• Toyota is looking to increase pricing at a rate “limited by customer expectations” pertaining to individual models, Automotive News reported.
• The expected increases are coming after the company experienced regional operating losses in its fiscal year which ended in September.
• The price increases are also expected in Europe, where the company also experienced regional quarterly losses.

Death, taxes, and rising car prices: three unending guarantees. Following quarterly regional losses and sharply increasing input costs, Automotive News reports, Toyota is planning to pass rising costs down to the consumer. The paper reports that Toyota executives just need to decide exactly how significant the increases will be. A Toyota spokesperson contacted by Car and Driver declined comment.

“We are really racking our brains trying to come up with the appropriate pricing level,” chief communications officer Jun Nagata said at Toyota’s November 1 quarterly earnings announcement. “We have begun to reflect those higher prices into the vehicle as much as possible.”

It’s common for new-vehicle MSRPs to increase by amounts at least by a few hundred dollars every year, and in some years, to see an increase midyear. One solution Toyota is looking into, according to the report from Automotive News, is increasing the frequency of price jumps.

Another method of raising prices that a lot of automakers, including Toyota, have been using recently is to drop base models, effectively raising the price of entry. Just last month, the company dropped the base L sedan from its Corolla lineup, resulting in an $1125 higher starting price . Pricing for the hatchback Corolla jumped by $1800 on the SE, and $2315 on the XSE—although Toyota also cut the starting price of the Corolla hybrid by $1250.

Dropping the base option generally means losing the car with the lowest profit margin for manufacturers. It also effectively raises the floor of ownership for buyers. According to the report, consumers’ expectations of pricing is one of the factors Toyota executives are using to gauge increases.

The warning of impending price increases came during a quarterly earnings announcement on November 1. According to the report, the company needs to make adjustments to offset regional operating losses for the North American arm of the company. Automotive News Europe notes that Toyota is also considering price increases are also in Europe, and for similar reasons.

The automaker has revised its annual production target downward, with purchasing chief Kazunari Kumakura partly blaming an ongoing semiconductor-chip shortage and commenting, “I don’t know when the chip shortage will be resolved.”

Source: Motor - aranddriver.com