TTAC Called It: Toyota Raises Prices. A Bit.
In General Motors Death Watch 182, I reported on GM's decision to squeeze a little more blood from the stone known as U.S. sales, by raising their product prices by 3.5 percent across the board. I pointed-out that Toyota could eat some more of GM's market share simply by NOT raising their prices or, God help Motown, lowering them. I predicted that ToMoCo would raise their prices, to maintain profitability and avoid any possibility of an anti-transplant backlash. And so they have. The AP [via The International Herald Tribune] reports that Toyota will up prices by a little over one percent– except for the hot-selling Prius (up 2.2 percent or $500). The timing is curious; the news arrived on the same day that GM lowered and extended its employee pricing. In any case, it's clear that Toyota is treading carefully, refraining from delivering the killer blow that's well within their power. They're leaving that for The Big 2.8 themselves.
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The local Toyota dealer has 'market adjustments' on the Prius ($4k), and something less on the Yaris, Corolla and Camry. Plus and $695 or maybe $895 add on for a Xzilon treatment, plus more for pinstripes and mud protectors. Ditto for the local Honda dealer concerning Xzilon, pinstripes and mud protectors. Even so, the Prius are sold before they hit, there are no Yaris or Corolla, no auto Civics and one Fit. So Toyota is just leaving money on the table if they don't raise prices.
Maybe they're trying to leave the domestics weak but not dead, so there are no surprise resurrections. I think Chrysler, GM, and Ford are more harmless in their current state than if they were allowed declare bankruptcy and cut the dead weight (read: UAW, excess dealerships, excess capacity, excess brands) or if they received cash infusions from the federal government.
So if gasoline went to $2.45 this week and stayed there for a decade before doing another rocket powered climb to $4 a gallon - would Detroit be any more prepared than they were this time? Would their game be any different?
Toyota is more interested in earnings than market share (although they want both.) For decades, they have made a point of not competing on price -- Toyota markets themselves as selling quality at a price premium, not as a discounter. Toyota will gain the market share organically, there's no need to lower prices in order to take it. I would expect them to raise prices across the board every year. If a product is slow, they move a batch with incentives and then reduce production enough so that the market is served without a massive price cut. Unlike the 2.8, they don't keep the factory open churning out product long after it has become obvious that nobody wants it, just so that it can end up on a rental lot. The Detroit philosophy is, If they build it, they will come...oops, they didn't show up, so let's rent it, instead. Not a great way to run a business if you want to make money.