Car Prices Quietly Spike As Japanese Model Shortages Grow
Car prices have risen quickly and quietly in the last few weeks, and it's not just due to increases announced by auto manufacturers to offset higher material costs. According to auto industry research firm Edmunds, the average amount that buyers are paying for cars or light trucks is up $350 since Japan's earthquake and tsunami in March. The data is based on prices paid in the first week in May.
Japanese car prices have gone up even more than the average. Honda (HMC) Accords are up $480 since the last week in April, and the prices of the Honda CRV, Toyota (TM) Corolla, and Camry are also much higher. Ironically, these price hikes are coming at a moment when Japanese car companies are bleeding market share. Edmunds reports that since the first week in April, Toyota's retail market share is down 28% and Honda's is down 20%. Meanwhile, GM's (GM) sales have surged 28%.
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Most car companies drop their prices when they need to bolster their sales. But for the moment, the Japanese car companies don't have and can't produce enough vehicles to keep their previous share of the American market. Toyota recently said its Japan production will not be fully restored before the end of the year. Perhaps the Japanese automakers are taking the risky route of raising prices to make up for lack of increases in inventory.
The danger for U.S. consumers is that American and European manufacturers may also raise prices. Normally, they would be looking for ways to cut them to take sales from the Japanese, but the post-quake inventory problem has made that unnecessary. With Japanese models are unavailable, buyers who might have preferred them will turn to other brands, even without the incentive of better prices.
Still, the May numbers from Edmunds may not be entirely positive for Detroit and Europe. A general price increase on vehicles may cause a buyer's strike in the U.S. as Americans elect to keep their current vehicles for a bit longer, and wait to see if prices drop again.
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