This phenomenon worries the automotive industry. “Our financial area is monitoring these variables all the time and they effectively have an impact on the commercial strategy of our products,” said Luis Trujillo, manager of product and price planning for Toyota Motors Sales de México, the fourth best-selling brand in the world. country.
Raw material costs have increased to such a degree that they now represent a significantly higher percentage of a vehicle’s production price: 11% compared to 6% in April 2020, at the beginning of the COVID-19 pandemic.
The increase in costs registered this year, plus the damage that the pandemic caused in the supply chains, keep manufacturers in uncertainty. “No one can deny that there are still enormous challenges in the supply chain. We will continue to have periods where there will continue to be a shortage of certain components,” said Guillermo Diaz, vice president of operations for Toyota Motor Sales de México.
This rise in new vehicle prices has another component: Container costs soared between 300% and 400%, compared to pre-pandemic prices.
A part of the increase in logistics and materials costs has inevitably been passed on to the prices of the models. The report of the Mexican Association of Automotive Distributors, which monitors automotive inflation on a monthly basis, has registered 9% year-on-year as of the second quarter of 2021. This is the highest level index since April 2009.
The future is not encouraging. Many cars that were once cheap will continue to rise in price in the coming months, as the graph of headline inflation continues to rise. Inflation in Mexico reached 7% in the first half of November, the highest figure in 20 years.
“Significant inflation has been announced in the country and in the world, and this will eventually have an impact on future plans,” said Marisol Blanco, director of corporate communication for Toyota Motor Sales de México.
As a result of rising car prices, consumers are likely to keep their vehicles for a longer period of time. Warranties will become key to reducing the cost of future repairs.
Longer financing is another alternative that manufacturers are pushing to dilute inflation through a lower monthly payment. The problem is that the client ends up in debt for longer and paying more at the end of the term.