As Sales Slump, Chrysler Raises Their Prices

Through the first nine months of 2008, Chrysler’s sales are down a full 25%, representing the worst year over year decline by far of any major automaker who sells cars in the US market. At the rate sales are declining, Chrysler will soon forfeit the #4 spot to Honda as the automaker seeks salvage something from what will likely be a historically terrible year for the company.

Soon after September’s sales totals were announced, Chrysler made another announcement, one that has analysts scratching their head in wonder. To the point, Chrysler says that they are raising prices on their 2009 models across the board – an average of $500 per vehicle – to keep in line with fast rising labor and material costs. The increase doesn’t reflect a $50 bump up in shipping charges, a separate charge Chrysler plans on passing on to its dealers.

A Shell Game For Chrysler

Odd as it seems to institute an increase right now, most consumers will likely not see any of it, particularly if they opt for one of the company’s many slow selling models which can only be moved if heavy discounts are offered. Though the price increases do not include 2009 models already on dealer lots, they’ll be added to all future deliveries. Still, with truck sales down by 250,000 units year to date, Chrysler will need to keep prices down on every Dodge Ram, Jeep Commander, and other big truck and SUV that they’re trying to sell. Likely, discounts will be made available throughout the next selling year, allowing customers to gains real savings regardless of whatever sticker price is shown.

Looking Ahead To 2010

Last month, Chrysler announced that the company was fast tracking a plan to bring at least one electric vehicle to the market by 2010, as they rolled out electric versions of the Dodge Town & Country, Jeep Wrangler, and a sports car that looks similar to the Viper. Chrysler plans on testing these three vehicles over the next year before deciding which one will go into production. General Electric is partnering with Chrysler to develop these cars which will run on a lithium-ion battery.

These are certainly strange times for the auto industry which was hit earlier this year by high fuel prices which resulted in consumer demand shifting almost over night to small cars, a line of vehicles that Chrysler has very few to offer. Then, with the credit industry on the ropes last month, additional sales were lost as customers couldn’t arrange financing. This blow came on top of a hit the company took earlier this summer when they suspended lease options corporate wide.

Hybrid Car Prices? Going Up!

Here’s a terrible thought: you’re planning to trade in your gas guzzler for a Toyota Prius, that famed hybrid car offering industry leading fuel economy, when you learn that the price you can expect to pay for the car has increased by $650. Sure, car prices go up all the time, but when you realize that the cost of the car has now topped $22,000, you begin to wonder if your investment in worth it.

Like all automotive manufacturers, Toyota is feeling the heat from skyrocketing raw material costs, including steel, and needs to recoup these increases by selling their cars for more money. However, this news may cause consumers to weigh their options including foregoing the hybrid for an economical gas model, such as the Toyota Yaris, a commuter car that gets 35 mpg and sells for $10,000 less than the Prius.

Some would argue that a hybrid car is always of more value than a gas model, particularly a car that returns at least 45 mpg on the highway, an advantage of 9 mpg over the Yaris (14 mpg combined city/highway). But, as consumers can quickly see, making up the cost differential between these two Toyota models can take years even if gas goes back up to $4 per gallon.

Let’s take a look at a chart comparing the Prius and the Yaris to see what kind of savings is realized after about seven years of driving or 100,000 miles:

Toyota Prius

• Gas: $4.00
• Miles Driven: 100,000
• Fuel Economy: 47 mpg combined
• Gallons Used: 2127
• Cost: $8511

Toyota Yaris

• Gas: $4.00
• Miles Driven: 100,000
• Fuel Economy: 33 mpg combined
• Gallons Used: 3030
• Cost: $12120

In the seven year time frame you would save $3609 in fuel, but still fall short by about $6400 for what you paid for the Prius. Of course, if you’re comparing your Prius purchase with getting rid of your 20 mpg combined city/highway 4WD Toyota Tacoma pickup truck, you would come out exactly even at the end of those seven years. Two very different vehicles I might add, a radical lifestyle change you’ll need to be prepared to make.

I’m not saying to avoid buying the Prius or any other hybrid and federal as well as state tax credits could make your purchase more affordable. What I am saying is that if you’re panicking over high gas prices and think that a hybrid model is always the answer, you could be wrong. Unless, of course, you plan on keeping your car for many, many years as a long term investment in your fuel conserving effort.

Copyright 2008-2012 — Matthew C. Keegan is the owner of a successful writing and marketing business based in North Carolina, USA. He manages several websites and is a contributing writer for Andy’s Auto Sport, a retailer of quality Lamdo doors and ground effects.

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