Toyota Backs Off Price Hikes

Despite earlier comments by the chairman of the Japanese auto giant, Toyota will not raise prices to take the heat off GM. Toyota and Honda fear a political backlash against their sucess in the US market. Honda CEO Takeo Fukui went so far as to say that the Japanese should limit their market share to 40% (they grabbed 30% last year).

Today, Toyota said it would not use pricing to punish its customers and help its comeptitors. The Japanese big three, Toyota, Honda, and Nissan are also mindful that Korean car makers are cribbing from the Japanese playbook and making strong inroads with inexpensive, increasingly sophisticated and reliable vehicles.

The American auto industry has grown complacent from huge profits on SUVs and trucks, and has lost the ability to make money on cars. With SUV sales down, and Japanese companies now profitably selling across the whole product spectrum, Detroit has turned to huge sales incentives. This has further eroded profitability, and decreased resale value, which in turn limits pricing power. They need hit cars more than higher competitive prices. The revival of Cadillac shows that it can be done. Meanwhile, there will be no bailout from competitors.

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