A trade war between the US and other regions risks higher global car prices and falling profits for manufacturers, Toyota’s second most senior executive has warned.
Rising raw material costs will already lead to higher prices in the US this year, according to executive vice-president Didier Leroy, but a global trade war would push up prices in all regions.
“There are no winners. Everybody loses something. It’s bad news for carmakers and bad news for customers,” he told the Financial Times in an interview ahead of the Geneva motor show, which starts this week.
“It can only have one impact, and that is to push the price up for the final customer.”
Fears of a trade war have been sparked after the US announced plans to impose taxes on imported steel and aluminium. The EU responded by threatening its own taxes on some US goods.
President Donald Trump, who came to power pledging to restore the fortunes of US workers and industry that he says has been harmed by unfair international competition, has tweeted that “trade wars are good”, and “easy to win”.
Mr Leroy said that US taxes would lead to a “potential reaction from China, from Europe, which starts a tariff war at the worldwide level”.
“If different regimes in the world have put up barriers it’s against business sense,” he said.
Toyota’s profits in North America fell last year, something that Mr Leroy said on Monday must not be allowed to happen for a second year.
Toyota builds around 70 per cent of the cars it sells in North America in plants throughout the region, while it also sources around three quarters of its parts from the same area.
Last year US steel prices rose, and carmakers absorbed the cost, he told the FT.
“When copper or steel price moves up we always have to choose how we manage that. Can we absorb it, can we reflect it in the price,” he said. “Last year, we didn’t really reflect it to the final customer. But I don’t believe that anybody can do it one year more, not without negative impact in terms of profitability.”
Despite the risks of price rises and falling profits, Toyota remains committed to the US market. Last year it pledged to spend $10bn in the market, including investments in new headquarters and opening fresh plants.
Last year Toyota sold 2.8m vehicles in North America, compared with 1.6m in its home market of Japan.
The market also boasts large numbers of highly profitable models, with half of all global Lexus sales made in the region.
Pick-up trucks, which are highly profitable for carmakers, are also a significant part of the market, he said.
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