Rising material costs next Big Problem for automakers
If you thought ever-tightening emission regs, the U.S. credit crisis, the shift to emerging markets, or the the out-of-control-price of gas that's forcing North Americans into small cars in historic numbers are the only challenges that have global auto execs downing Advils like popcorn, think again.
According to General Motors and Nissan, the rising price of material costs—specifically steel—is what's giving those who run car companies headaches these days.
Higher material prices are the "single most important challenge facing the industry," Nissan grande frommage, Carlos Ghosn, told company shareholders in Yokohama today.
Expect automakers worldwide to raise vehicle prices by about 2 or 3 per cent in 2008 to offset the rising cost of raw materials, he said.
"All car manufacturers will increase prices. It's a question of time. How can you not increase prices if the price of raw materials goes up 100 per cent?"
On Monday, GM announced that will raise prices of 2009 U.S. vehicles an average of 3.5 per cent. That would add $1,050 to the pre-tax cost of a $30,000 car.
A dealer who was in on the conference call said some of the price increase is due to more product content, but rising material costs and the weak U.S. dollar is also to blame.
Canadian GM officials have not commented yet if we'll see similar increases here.
Ultimately, this could mean more cars like Hyundai and Kia's $9,995 specials or Volkswagen's City versions will enter the market. In other words: decontented cars to keep the advertised prices down where once-standard creature comfort features like power windows, A/C, keyless entry, and ICE become optional add-ons.
[Source: Automotive News]