In a bow to the power of the weak U.S. dollar, AP reports that Toyota Motor Corp. (NYSE: TM) is raising prices on some of its lower-priced cars. A weak dollar relative to the Yen puts downward pressure on earnings for Toyota since sales in dollars get translated into fewer Yen -- the currency in which Toyota reports earnings.
So, Toyota is trying to raise prices on its more popular, higher gas mileage models in the U.S. figuring it will lose less market share because of the strong demand as consumers -- sickened by paying so much of their income for gasoline as it powers through $4 a gallon -- scramble for Toyota's more fuel-efficient vehicles.
AP reports that Toyota's price increases, which will start in the middle of May, include a hike of $200 on the 2008 Yaris sedan, which will cost $12,425. The 2009 Camry will go up $200 to $18,920. The hybrid Camry, introduced as a 2007 model in late 2006, will cost $300 more, at $25,650. For example, the price of the Lexus IS 350 entry sports sedan will rise $300 to $36,305. However, the pricing of the 2008 Lexus IS F high-performance sports sedan won't change.
Consumers will need to decide whether the higher prices that Toyota is charging will be more than offset by the greater fuel efficiency of these models. I am hoping that an increase in interest rates will nip this inflation in the bud. But for those in the market for a fuel efficient car, they better buy this week before those prices increase.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
