Toyota Motor Corp. said Monday it was raising prices on some passenger cars in Japan for the first time in more than 30 years in an effort to cushion its profits from the impact of soaring material costs.
Japan's largest automaker said it would increase the retail price of its popular Prius hybrid by three percent from September 1. Prices for commercial vehicles will rise by 2.0 percent on average.
Toyota said that so far it had been able to offset material prices by cutting costs, but with expenses expected to remain high it decided to raise the price of vehicles that use large amounts of steel or rare metals.
Toyota president Katsuaki Watanabe admitted in a recent speech that the decision was difficult for the company, which is in a tight race to dethrone General Motors as the world's top automaker.
“Only the ones who can sense the changes and respond to them can survive,” Watanabe said.
“I myself have personally been agonising what to do to navigate the company. Our true self shows in tough times. I think it is a good opportunity to sharpen our human resources,” he added.
It is the first time since 1974 that the auto giant has raised the domestic prices of existing passenger vehicles, rather than waiting for the launch of new models.
But some analysts have questioned whether the price hikes would further weaken demand, which has been falling as the Japanese economic stumbles.
The price of iron ore, a vital material to make steel, has soared in recent years due to rising demand, particularly in fast-growing China and India.
Nissan, Japan's third largest automaker, has indicated that it is waiting for market leader Toyota to raise vehicle prices before it follows suit.
Toyota reportedly is also mulling cutting its global sales target for 2009, pushing back its goal of becoming the world's first company to sell more than 10 million vehicles in one year.
The company has enjoyed fast-growing sales and profits in recent years, helped by strong interest in its fuel-sipping hybrids.
But the US economic slump, weak domestic demand and soaring commodity costs have put the brakes on its expansion
