But surely it will spread to all markets?
I think all manufacturers are in a bind here.
I think raw materials on their own account for a relatively small portion of a car's production costs in the case of most mass produced cars*.
Raw material, energy and borrowing costs all going up combined with falling sales.
They need to increase margins per unit sale, to maintain the net profits to turnover ratio.
Increase in prices leads to even lower sales, hence they need to increase margins further. The sales then drop again!
* except for the Nano. Tata, the makers of the Nano, are in trouble with their pricing model for the Nano because the Nano is particularly sensitive to raw material costs.
Edited by jbif on 28/08/2008 at 15:33
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