April 5, 2013

Automakers could drop prices if the value of the yen drops against the dollar

The Associated Press

DETROIT — U.S. shares of Toyota, Honda and Nissan soared Thursday as investors anticipated a weaker yen will allow them to sell cars more cheaply in the critical U.S. market.

The Bank of Japan plans to increase the amount of cash in circulation, a move that will depress the value of the yen against the dollar. That will lower the cost of producing Japanese imports for Americans.

Shares of Toyota, Honda and Nissan all rose more than 4 percent as some analysts predicted a drop in Japanese car prices. But they also say the effect of the weaker yen will be blunted because those companies have previously moved so much of their production to North America.

The yen weakened 3.5 percent against the dollar. Shares of Ford and General Motors fell slightly.

A weaker yen helps Japanese carmakers because it lowers the cost of producing cars in Japan. Cars built more cheaply there and then imported and sold in the U.S. bring higher profits to Japanese companies.

Standard and Poor's analyst Efraim Levy said the most immediate impact for consumers will could be lower prices for Japanese cars. Toyota could undercut its rivals because its production costs are lower. In the longer term, Levy said, the company might add more features at a lower price.

But most important, Levy said, is offering competitive vehicles. That's an advantage U.S. automakers enjoy right now. U.S. sales for GM, Ford and Chrysler jumped 9.5 percent in the first quarter, compared with a 3.2 percent increase for Asian brands, according to Autodata Corp. The Detroit automakers control more than 80 percent of the full-size pickup truck market, which is the fastest-growing segment right now.

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