Toyota Bumps Prices For 11 Models | The Truth About Cars
Ok, since I was accused (rightfully so) of picking on just GM for this, Toyota has also used the “rising materials cost” excuse for raising prices on some models.
A Toyota spokesman said:
“Price changes were made to keep up with current economic conditions and the rising cost of major components… Materials in global markets have gone up. We have made an effort to absorb some to the cost while still protecting our price position.”
Don’t get me wrong — companies are allowed to raise prices. It’s their choice based on their view of the market. I’ll quit beating this drum, but it fascinates me that it’s socially acceptable to give the “our costs went up” reason.
We don’t hear as often of price reductions because raw material costs go down (well, maybe except in the electronics industry where technology is moving fast…) Has this ever been offered as a reason to cut prices in the auto industry? Let’s keep the discussion there.
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About LeanBlog.org: Mark Graban is a consultant, author, and speaker in the “lean healthcare” methodology, focused on improving quality and patient safety, improving access, reducing costs, and fully engaging healthcare professionals. He is also the Chief Improvement Officer for KaiNexus.
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Heh, it’d be a rather silly reason to offer for cutting prices. Usually you chalk up lower prices to being “really super awesome!!!” or whatever nice term the marketing crew comes up with (“we love our customers,” “breakthrough technology,” etc.).
It is an interesting dichotomy – “Our costs went up” is the market acceptable explanation for increases, but is a completely non-optimized strategy for explaining decreases.
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Henry Ford arguably practiced this principal with the Model T. It was introduced in 1909 at ~$850 and eventually reduced to $300 by the 1920′s when it reached peak production. This improvement can be considered “raw material” related considering he was vertically integrated and applied his continuous improvement philosophy to wood and steel just the same as his assembly line.
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Great point. I’m sure Henry Ford only lowered prices because he knew he could sell more product at that lower, yet still profitable price as he increased production efficiency and materials efficiency. I’d be curious to go back to his books to re-study his motivations and writings around the Model T price reductions and the relationship to cost.
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Good opinion piece on this subject, Figuring out automakers’ pricing puzzle
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