Small Cars Getting Big Price Hikes Soon Page 2

April 14, 2011

2011 Toyota Prius

2011 Toyota Prius

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In a month, Prius went from discounted to sticker price and beyond

The Prius has been the poster child for this phenomenon and has seen the largest jump in price. According to TrueCar data, it was selling at about $300 under dealer invoice up to the March 11 earthquake, but now it's selling at or slightly over MSRP—a $2,000 price spike in just a matter of a month.

What we're likely to see is a surge on prices across the board on new vehicles, with the most significant hikes on small-car models sourced from Japan. And if gas prices rise closer to the $5 mark by the end of summer, significant premiums on some models could become the norm. Meanwhile, what few incentives still exist will be pared back even more.

That sounds like good news for the recovering auto industry, but it's not; while dealers might be making more money per vehicle, automakers won't be able to build as many of the vehicles they could to meet demand and take advantage of the market situation. The industry was on its way to a gradual recovery, but the supply disruption could prove a speed bump that would push it off for some time.

But, as some have suggested, it could bring a window of opportunity for the domestic automakers—at least for their vehicles that aren't reliant on Japanese parts.

In the meantime, with some Japanese suppliers expected to be affected through the summer, Toprak says that there's no reason to believe that the supply pressure will dissipate quickly. "The advice would be, based on what we see today, we don't see any kind of ease in price anytime soon," says Toprak. "The prices of everything will go up, moving forward."

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