Toyota Will Make Affordable Cars More Expensive to Buoy Profits: Report
Price hikes are coming and along with rising interest rates, it looks like new cars will be less attainable for entry-level buyers.
Faced with production slowdowns due to fewer chips and rising costs of materials, Toyota is reportedly turning to the one resource it has left to recoup slumping profits: new-car buyers. According to Automotive News, Toyota’s top brass is wondering how much the market will bear to raise prices without losing buyers.
"We are really racking our brains trying to come up with the appropriate pricing level," Toyota's chief spokesman Jun Nagata said Monday. "We have begun to reflect those higher prices into the vehicle as much as possible."
Executives said they were constrained by the expectations that some of the cars in their lineup—namely the Corolla and Camry—are expected to be affordable for many customers. The price hikes are likely to come on the lower end of their lineup, on cars that have little margin to begin with anyway. Toyota quietly axed the base version of the Corolla sedan with a manual transmission, effectively raising the entry price of that model by $2,315. That’s on top of the incremental increases year over year in MSRP from 2022 to 2023. According to Toyota, this is the first time a base Corolla has been offered without a manual transmission in the model’s history. (Not including the GR Corolla, which keeps a manual transmission but is a performance variant of the car.)
Toyota and other automakers looking to raise prices are risking a double whammy from rising car prices and rising interest that severely limits buyers’ spending power. According to Kiplinger, the average rate for a new-car loan is 5.9 percent, up from 3.9 percent this time last year. Shrinking supply, spiking finance costs, and higher MSRPs from automakers could mean that—despite predictions that 2023 would be improved from this year—any recovery to pre-pandemic levels could be a long, long way off.
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