Honda, Toyota, Mitsubishi price hikes, as a result of falling ringgit

Kuala Lumpur: The Edge Weekly reports at least three carmakers Honda, Toyota and Mitsubishi are expected to increase prices any time now due to the falling ringgit in International market. Some suggest that the carmakers will most probably do so as early as Oct 1.

The Edge’s Jose Barrock and Izatun Shari reported that other brands like Hyundai have already hiked the prices of their models namely – Elantra, Veloster and Santa Fe earlier this month.

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The weekly also reported that that second largest national car manufacturer, Perodua with a 31% market share might also increase prices to dilute the losses occurred by the rising exchange rate.

The ringgit noted its lowest mark of 4.40 against the US dollar recently, the lowest it has been since 1998. Falling against the dollar is one case, the ringgit isn’t faring well against the euro either. The Malaysian currency has noted a fall of about 15% measuring 4.88 since the start of the year against the euro at the moment.

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Earlier reports and sales statistics released by the MAA suggests that Malaysian automotive industry is hanging on a loose strand at the moment because of the weakening ringgit, dampened economic conditions and the implementation of the Goods and Services Tax (GST) in April. Among all these, the price hike will only add fuel to the fire of adversely affected sales.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad quoted, “ Increasing prices is not going to help boost sales. On the contrary, it will worsen the situation as consumers are already tightening their belts due to inflationary pressures.” “However, there is a limit as to how much of the costs car companies can afford to absorb due to forex losses. It (increasing prices) is not an easy decision to make, and each company will have to evaluate its own situation,” she added.

The major reasons behind the price hikes were suggested by the magazine, which cited that the local industry executives have to shell out euros for European cars and US dollars for all other makes.

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We can summarise the whole as, the cost of doing business has increased because of the major impacts on the economy. Those manufacturers who deal in fully imported completely built-up (CBU) units as well as completely knocked down (CKD) units with very low local content are affected the most.