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Incentives cut on Japanese cars

By Claes Bell ·
Saturday, March 19, 2011
Posted: 7 am ET

That didn't take long.

The aftershocks of the disaster in Japan are beginning to reverberate in the U.S. auto market. American auto dealers selling Japanese brands like Honda and Toyota are cutting incentives on models affected by factory shutdowns in Japan. From the Associated Press:

Buyers will typically have to pay sticker prices, instead of enjoying discounts that had been the norm for small cars and hybrids imported from Japan. Besides the Prius, models that suddenly cost more include Honda's Insight, Fit and CR-V; Toyota's Yaris; and several Acuras and Infinitis.

The aftershocks of the disaster in Japan are beginning to reverberate in the U.S. auto market.

The aftershocks of the disaster in Japan are beginning to reverberate in the U.S. auto market.

Small cars such as the Yaris, with a $12,955 sticker price for a base model, and the Honda Insight, priced at $18,200, are losing their typical discounts of 5 percent to 10 percent.

The price increases "will last weeks, if not months," says Jesse Toprak, vice president of industry trends and insights for, a website that tracks what cars sell for at dealerships.

I've got mixed feelings on this. On one hand, you never like to see retailers raising prices in the wake of a horrible, deadly natural disaster. As political consultants are wont to say, the optics are terrible.

On the other hand, I kind of sympathize with the dealers. They're losing some of their most fuel-efficient models just as gas prices are rising and demand is ramping up. Sure, it's possible that the nuclear crisis will be resolved in short order; Japanese automakers' factories will come back online quickly, and shipping infrastructure will be ready to go sooner than we think. But I doubt it.

More likely, I think the supply of all Japanese cars will be constrained to varying degrees for the rest of the year, and dealers will have to live with reduced volume that will likely end up doing a lot of damage to their businesses. That's especially true when you consider that the fewer cars a dealership is able to sell, the fewer cars they'll be able to make money servicing in the long term, and the more market share they're giving up to rivals unaffected by the disaster. What this move probably reflects is dealers trying to make the most out of the inventory they still have on hand while it lasts.

What do you think? Should dealers of Japanese brands be raising prices? Is it gouging or just prudent business?

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Claes Bell
March 21, 2011 at 3:10 pm

Thanks for reading, Joe. I think you're right the rise in the value of the Yen may be a contributing factor, but the Yen was actually higher in October than it is now, and I'm unaware of any similar cut-back in incentives that accompanied that particular spike in the Yen's value. Fact is, the Yen has been high for months now, and that inflated value has likely already been priced into the MSRPs and incentives of Japanese automakers.

March 21, 2011 at 3:10 pm

I think you're missing the "cause" behind the "effect". The reason they have to increase prices is because of the significant rise in the yen (compared to USD). Everything costs more for them now so they need to charge more to make a profit.