Here Comes Deflation: Toyota Asks Suppliers To Lower Prices As Volumes Ramp

Could it be possible that deflation is finally on its way? It seems as though Toyota thinks so. 

The auto manufacturer is breaking a trend in the industry of succumbing to rising prices and is asking “certain parts companies” to cut prices for the upcoming third quarter now that it expects to be ramping up output.

Based in Japan, Toyota has a history of asking suppliers to share price savings that occur as a result of buying in volume. These cuts usually amount to about 1% price cuts per year, according to Nikkei Asia, who reported the story. 

The automaker got no such discount this spring, but Toyota now sees a recovery in output that prompted it to ask suppliers for lower prices.

It also said it wants to “give support to suppliers particularly feeling the squeeze”, which includes helping cover high costs for materials, energy and logistics and helping pay for storage that suppliers have taken on in anticipation of more volume. 

Toyota negotiates prices twice a year, Nikkei reported – usually once for the first half of the year and once for the second half. This year, it skipped its negotiations for the first half of the year and is asking for the price cuts heading into the second half. 

The company said it expects to build 800,000 vehicles worldwide in July, exceeding the 770,000 produced last year. For the back half of the year, the company sees a global production average of about 850,000 units per month, on par with its all time high.