Goodyear increases tire prices 6% to offset higher costs

AP:

The price increase affects all its consumer replacement tires. The increase will be felt by the company’s dealers and distributors, who buy tires directly from Goodyear. It is up to the distributors whether to pass the increase on to consumers, Davis said.

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Car rental prices up nearly 50 percent in past year

Canadian Press:

Compared with a year ago, rental prices increased nearly 50 per cent on daily rates for midsize cars booked a week in advance, according to the Abrams Travel Data Rate Index, which tracks major car rental brands. The Abrams Index found an average daily rate of US$93.06 on the fourth Monday in October this year, compared to $64.56 on the same day a year earlier.

Prices were also up more than 50 per cent for a compact car booked a week in advance, with an average weekly rate of $289.14 on the fourth Monday of October, compared to $188.46 on the same day in 2008, according to the Abrams index.


Ford Motor Co. increases net prices

Bloomberg: “Ford improved net pricing, transaction amounts after discounts, on its vehicles by $1.9 billion in the third quarter as it cut incentives and sold a mix of cars and trucks with more costly options…”

 


Sumimoto to raise prices on exported tires

From TireBusiness.com:

Sumitomo Rubber Industries Ltd. (SRI) is increasing prices for Dunlop-, Falken-, Sumitomo- and Ohtsu-brand tires it exports by 5 to 15 percent, depending on size, category and market …. SRI cited the rising cost of raw materials, including natural rubber and crude oil, as the reason for the increases.


Tire prices are rising

When President Obama advocated tire inflation during last year’s presidential campaign, this isn’t what he had in mind:

The epicenter of sticker shock is moving from the car dealer’s showroom to the tire shop. While politicians and tire manufacturers have been battling over a 35% tariff on lower-cost Chinese-made tires that took effect last month, consumers had already been facing a run-up in tire prices that began years ago and jumped steeply even before serious talk of tariffs began. The average price of tires for passenger vehicles rose 9% in 2008 compared with a year earlier, and 24% compared with 2005, according to Modern Tire Dealer, a trade publication.

Of course, car owners can save money by replacing worn-out high-end tires with new lower-end tires. Such tires, however, are already becoming more expensive thanks to new tariffs on Chinese tires.

Related posts:

New cars more expensive, too

Used-car prices on the rise


New cars more expensive, too.

We’ve already seen that prices of used cars are rising rapidly (see here, here, and here). Now, according to Bloomberg, new cars are getting pricier too:

Buyers who have been waiting for better deals on new cars may be disappointed.  General Motors Co. and Ford Motor Co., bucking decades of tradition, are weaning themselves from dependence on profit- sapping discounts after factory shutdowns curbed dealers’ supply of cars and trucks.

Incentives on GM, Ford and Chrysler Group LLC autos plunged 26 percent to $3,278 in August from a March peak, while discounts industrywide fell 22 percent to $2,474, according to researcher Edmunds.com. The U.S. automakers’ vehicles sold for an average of $2,000 more in the second quarter than a year earlier, said researcher J.D. Power and Associates….

Ford buyers paid an average of $2,000 more for each vehicle in the second quarter, according to the automaker. That translated into a $900 million increase in net pricing in North America during the period, Ford Chief Financial Officer Lewis Booth said July 23. Researcher Autodata Corp. estimated that Ford pared spending on discounts 27 percent this year.

The average price per vehicle commanded by GM, Ford and Chrysler in the U.S. rose 7.8 percent to $27,571 in the second quarter, from $25,567 a year earlier, according to J.D. Power. Industrywide, average vehicle prices rose to $26,921 in the second quarter from $25,954 a year earlier, Westlake Village, California-based J.D. Power said….


Used-car prices on the rise

Just nine months ago, Mike (“Mish”) Shedlock predicted that “Cars are going to get cheaper, much cheaper. Auto prices will crash…It makes no sense to buy a car now, no matter how good the deal looks. The deals will get progressively better as the year rolls on.”

Mish linked to numerous photos, such as this one, showing thousands of unsold cars sitting in ports:

cars

According to this September 30, 2009, article in the Wall Street Journal, however, used-car prices are increasing, not decreasing:

Prices for second-hand cars took a hit late last year, along with the prices of many other assets. But since the start of this year, a combination of tight supplies of both new and used vehicles and higher demand from a frugal public have pushed average used-car prices to the highest levels in years, industry watchers say. Demand seems particularly strong for used SUVs, analysts say, reflecting lower gas prices.

That should be good news if you are selling or trading in a well-tended used vehicle over the next couple of years. It might not be so welcome if you are trying to buy one.

One widely followed measure of used-car prices, the 14-year-old Manheim Used Vehicle Value Index, will likely hit a record when data for September are released in early October, says Thomas Webb, chief economist for Manheim Consulting, a subsidiary of Cox Enterprises Inc.

Update (October 3, 2009): A reader asserts that the surge in used-car prices is due to two factors: (1) increased frugality among consumers, who can no longer afford new cars; and (2) the cash-for-clunkers program. Neither of these trends, my reader suggests, should be interpreted as signs of inflation. The Wall Street Journal article , however, attributes the decline in used-car prices to a reduction in the supply of new and used cars:

“What has happened over the last couple quarters is with supply being down, we’ve seen wholesale prices continue to appreciate. It’s just a basic supply-and-demand model,” CarMax President Tom Folliard said in a conference call…

The government financed “cash for clunkers” sales bonanza tilted the car industry’s supply-demand teeter-totter heavily toward the “demand” side, helping dealers to clear out new vehicles faster than they might have otherwise. But cash for clunkers isn’t the biggest reason why the value of your used vehicle could be going up. A bigger factor is millions of vehicles you can’t see—the ones car makers didn’t make, sell, lease or dump into rental-car fleets during the past year.

Big car makers had been slashing production—or shipments from overseas—to work down bulging inventories of unsold new vehicles that clogged dealer lots as the economy tumbled last year. Demand for many big vehicles—large SUVs, pickups and big cars—cratered in mid-to-late 2008 as gas prices surged. Detroit shut SUV factories right and left.

In short, there is less excess capacity than many observers had believed. Moreover, it’s worth noting that prices of new cars have increased since January 2009 (see Table A of this Bureau of Labor Statistics news release). This undercuts my reader’s implied claim that the increase in used-car prices reflects has come at the expense of  new-car prices.

By the way, I am an admirer and long-time reader of Mish’s blog. He has been right far more than he has been on wrong. But when he predicted a “crash” in auto prices, he got it wrong. And, as we shall see, the automobile market is not the only sector showing signs of inflation.