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Cost of steel: Car prices to soar

2008-06-25 08:22

Soaring raw material costs pose a major challenge to carmakers, which have no choice but to raise vehicle prices, Nissan chief executive Carlos Ghosn said Wednesday.

The surging prices of steel and other materials are the "single most important challenge facing the industry and facing Nissan," Ghosn said at the group's annual shareholder meeting in Yokohama.

"The size of the increase and the impact it has on cars is
impossible to absorb. As an industry we have been weakened by this culture of never increasing prices. How can you not increase prices if the price of raw materials goes up 100%?"

Anglo-Australian mining giant Rio Tinto said this week that it had agreed on a near doubling of the price of its iron ore - a vital raw material used to make steel - to Chinese group Baosteel.

"It's a question of time before this comes and hits us," said Ghosn.

"We have no choice but to increase prices."

Nissan is facing "severe headwinds" from higher material and energy costs, the weakness of the US and Japanese economies and a stronger yen, which is bad for overseas earnings, he said.

Nissan, Japan's number three automaker by sales, is pinning hope on the fast-growing markets of China, India, Russia and Brazil to help drive up its future earnings.

"We intend to take full advantage of growth in emerging markets," said Ghosn.

- AFP

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