Toyota Freezes Parts Prices to Ease Supplier Burden

Toyota Freezes Parts Prices to Ease Supplier Burden

Latest Update August 22, 2024
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Toyota has decided to  keep prices unchanged for parts procurement in the second half of the 2024 fiscal year, including for large-scale suppliers, to alleviate the burden of rising energy and material costs, as well as increased labor costs due to decreased production caused by certification issues.

Japan, August 8, 2024 - Toyota Motor Corporation has decided to keep prices unchanged for parts procurement in the second half of fiscal 2024 (October 2024 to March 2025). During this period, parts prices will remain unchanged not only for small and medium-sized enterprises but also for large companies. This decision comes in response to rising energy and material costs and will also cover increased labor costs. With production volumes decreasing due to certification issues, this measure aims to alleviate concerns about the operations of Tier 1 (first-tier business partners) and to restore and strengthen the supply chain.

Toyota implements “price revisions” twice a year, once in the first half (April-September) and once in the second half, to optimize procurement prices in light of the cost reduction activities of its primary suppliers. Until now, prices were primarily influenced by increases in raw material costs. However, starting in the first half of fiscal 2022, increases in energy costs were also considered. From the first half of fiscal 2024, costs related to “investment in people,” such as labor costs, were allowed to be included.

In the first half of fiscal 2024, Toyota refrained from requesting price revisions from small and medium-sized enterprises subject to the Subcontract Act, while continuing to make minimal requests to large enterprises. In the second half of the year, this approach will also be extended to large companies.

Starting in the first half of fiscal 2024, Toyota has been able to reflect “investment in people,” including improvements to the workplace environment and working styles, in procurement prices. This trend will continue into the second half of the fiscal year. Some suppliers are also expanding the scope of those responsible for labor costs. In the event of a sudden change in production, once the contracts of temporary employees are terminated, it can be difficult to immediately replace them with new personnel due to their level of expertise. For this reason, companies often retain temporary employees in preparation for future production increases, but this decision by Toyota will help reduce that burden.