Lexus Prices Are Set to Go Up as Toyota Suffers Operating Losses
After suffering operating losses stemming from inflation, Toyota and Lexus prices are set to rise – here’s why.
Over the past couple of years, new vehicle inventory levels have hovered at or around record lows thanks to various supply chain issues and other global problems, while demand remains high. As anyone who took economics in high school already knows, this has led to price increases – in many cases, driving the average cost of a new vehicle into record territory. However, with shortages and inflation rearing their ugly heads, this has also made it more expensive to build cars, and automakers are passing those extra costs on down to the consumer. Thus, it should come as no surprise to learn that Lexus prices are getting ready to increase, too.
This information comes to us from Automotive News, which recently reported that Toyota and Lexus prices are set to increase thanks to surging materials costs and quarterly operating losses. Toyota brass are reportedly contemplating just how much they will have to raise those prices, though instead of installing them all at once, the automaker might do more incremental price increases throughout the year rather than the typical, massive, new model year jump that many others have gone with in an effort to reduce sticker shock. Additionally, the company could simply choose to cut base models from its lineup, as it did with the Corolla L last month.
As one might imagine, the discussion surrounding the potential rise in Toyota and Lexus prices has become quite the hot topic in the Club Lexus forums, where many have chimed in with some thoughtful insights into why this is occurring.
“It has more to do with the yen being weak, which used to be a good thing but is no longer the case,” said Club Lexus member Motorola. “A weak yen means it costs more for Toyota to import supplies (i.e. chips) and that cost is thus transferred to the consumer. Their supply chain is much more globalized now than it was in the Japanese bubble era, when Toyota could sources all its components domestically, so don’t expect them to pull an LS400 sales bargain ever again. Also most Toyota/Lexus vehicles sold here are manufactured in North America so the yen has literally zero impact on those factories and supply chains.”
“That is the difference between, what in economics, is known as Demand/Pull vs. Cost/Push inflation,” added mmarshall. “We have seen gross examples of both in the last couple of years. Last year, it was mostly Demand/Pull inflation as the excessive demand for new vehicles went after a sharply-reduced supply due to several factors which hampered new-vehicle production. That started the inflation-ball rolling. Now, the inflation and increased costs have become so well-entrenched into economy that the inflation we are now seeing is mostly a result of Cost-Push, where higher costs of production are now forcing automakers to raise prices even further, independent of customer demand. It is either that or lose money on each vehicle.”
Indeed, these are tough economic times that we’re all living through, and price increases are something that we never want to see – at least to the extent that we’ve seen them rise in recent months. However, it’s also a tough situation for automakers like Toyota, which must do something to compensate for its own losses caused by inflation and the rising costs of goods.
Photos: Lexus
Join the Club Lexus forums now!
