UMWT to lower price of next-gen Camry? Fat chance.

“The Camry is currently assembled in Thailand and selling for between RM144,000 and RM174,000 as a CBU (completely built-up) unit. Once locally assembled, we believe this price would be brought down by at least 5% as import duty will no longer be imposed,” it (RHB Research) said.

I always wondered where do these people come from? Seriously, even salesmen who talk a lot of cocks and bulls will know that car companies (in our market at least) will almost never reduce prices on their subsequent next generation models. A 5% reduction in the selling price of a replacement model will also translate to a 5% reduction in resale value of the existing model. And bread and butter models from brands like Toyota and Honda, which boasts of very strong brand loyalty rely a lot on repeat buyers. It is not uncommon to find a Camry / Accord owner to replace his current car with another newer model Camry / Accord.

Plus, does the analyst really think that UMW Toyota is going to pass down the 5% import duty saving to consumers? Who is going to pay for the RM 100 million investment to refurbish the ASSB plant? The charity of UMW shareholders?

You may see prices reduced in newer models when studying developed / saturated automotive markets. In Australia, selling price of the facelifted Nissan Latio (Tiida) was reduced by at least AUD 1,000 across the model range, in a bid to arrest stagnanting sales of the slow selling Tiida. But that is in a market where 1 in 2 person already owns a car. And population growth has stabilized. While in Malaysia, it's more like 1 in 4 person owns a car, in a developing country. But as a general rule of thumb, car prices hardly ever comes down unless it is the result of an industry wide regulation change.

Else, lowering prices of new models only reduce the existing model's resale value, making phasing out of existing stock by dealers a lot more difficult (require costly rebates / discounts), affects the brand value and at worst it could actually spark off a race-to-the-bottom price war which will benefit nobody. Price wars when carefully managed may work in services sector like telco or even FMCG products but very rarely do they work for cars. In the late 90s, the Taiwanese operations of Ford and Mitsubishi used to have some very serious price wars for the Lancer and Focus, when dealers started slashing prices and giving out huge discounts for the two new models. The only one who benefitted from the price war was Toyota, which held its price and ground but went on a brand building marketing blitz and shot past both Mitsubishi and Ford, who used to hold top spots in the sales charts. Both Mitsubishi and Ford never require recovered from their seriously damaged brand value. Taiwanese consumers can no longer accept a higher priced Ford or Mitsubishi.