TOKYO (Thomson Financial) - Japan's second-largest carmaker Honda Motor Co.
expects a sharp rise in its steel costs but is not planning to hike prices on
its existing cars or remodelled products to reflect higher steel prices, the
company's chief executive said on Thursday.
Nippon Steel has demanded a significantly large increase in steel prices,
and Honda and the steel maker will likely reach agreement on a steel price hike
in the near future after ongoing talks, Takeo Fukui told a news conference.
In April, one non-Japanese steel maker unilaterally demanded a price hike in
breach of the yearly contract, which went into effect at the start of the year,
for a price higher than last year, he said.
"We had no choice but to accept its demand, otherwise it would stop
supplying us. U.S. Steel, which is a key supplier for Honda in the United
States, and other non-Japanese steel makers will likely follow suit. We are in a
crazy situation," Fukui said.
He was speaking at the unveiling of Honda's Freed compact minivan, which
will debut on Friday in Japan. The company may consider selling it outside Japan
after testing the home market, Fukui said.
The Freed, which features the same 1.5-liter engine size as its predecessor
the Mobilio, is priced higher than the Mobilio for its superior fuel efficiency
and bigger body.
Honda makes Freed at its Saitama plant on the outskirts of Tokyo. The
company mainly buys steel from Nippon Steel for production at the plant and
elsewhere in Japan.
"Freed does not price in the entire impact of a likely rise in steel prices.
In that sense, the Freed is a good buy for our customers," Fukui said.
"We will factor in the impact of higher steel prices in the prices of our
new products to be made from now," he said.
He suggested the price tags of Honda products may start reflecting the full
impact of higher steel prices in two to three years.
"It usually takes two to three years to develop a car," he said.
As for existing products, he said customers will not accept a price hike
without any change to product features.
Fukui said Honda does not have plans to build a manufacturing base in the
rapidly growing Russian market, and will instead continue focusing on building a
solid dealership and penetrating the market.
yumiko.nishitani@thomsonreuters.com
.
yun/ng
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