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Japanese Apply Brakes to Car Price Hikes : Autos: A strenghtening dollar is helping that country's firms compete with U.S. Big Three.

October 28, 1995|From Reuters

DETROIT — Japanese auto makers, aided by a stronger dollar, are holding price increases on their 1996 cars and trucks to a minimum in an effort to narrow the price advantage enjoyed by Detroit's Big Three.

The more aggressive pricing, made possible by a drop in the yen to more than 100 to the dollar from about 85 early this year, is expected to make life more difficult for General Motors Corp., Ford Motor Co. and Chrysler Corp., especially in the hotly contested small- and mid-size car markets.

"I've been joking with the Japanese companies, telling them, 'You guys are rich now,' " said automotive consultant Michael Luckey, president of the Luckey Consulting Group.

"At 100 yen to the dollar, the Japanese are going to be more competitive than ever, particularly as they can use this money to be more aggressive with incentives."

Three of Japan's five major auto makers--Toyota Motor Corp., Honda Motor Co. and Mazda Motor Corp., have held price increases on their 1996 models to less than 2% over their 1995 models.

One of them, Mazda, has actually cut 1996 sticker prices on several models from 1995 levels through a special incentive program. Nissan Motor Co. raised prices 2.7%; Mitsubishi Motors Corp. has not released its 1996 prices.

By comparison, GM raised its prices 2.7%, or $570 on average, and Ford increased its prices 2.5%, or $550 on average.

Chrysler announced a somewhat smaller increase than its Detroit rivals--1.4%, or $307, over comparably equipped 1995 models.

Two years ago, the strong yen forced Japanese auto makers to raise prices about $2,000 a car, on average, above Detroit models. But the stronger dollar means more yen for Japanese auto makers converting U.S. sales into currency back home, so price increases become less important to them. Japanese auto makers have also used their cars' superior resale value and hefty incentives to compete with lease payments that differed little from their U.S. competition.

Indeed, the slide in Japanese firms' share of U.S. auto sales that started in the early 1990s is starting to reverse. The Japanese had 24% of the U.S. car and truck market in 1990, but that dropped to just over 23% in each of the last two years.

In the first nine months of 1995, Japanese auto makers had 23.5% of the U.S. market.

And as Japanese auto makers move more and more production to the United States and develop new models with lower costs, they are expected to become even more competitive.

"I think it's going to be increasingly tough for the Big Three to gain market share," said David Healy, an auto analyst with Burnham Securities. "I still think the transplants can build a car in the U.S. cheaper than the Big Three can."

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