The story about Lexus's domestic "wolf" will begin to continue again!
On June 29, according to relevant media reports, Toyota plans to set up a wholly-owned Lexus plant in Shanghai to produce high-end electric vehicles, and seeks 100% sole ownership and does not accept the involvement of local joint venture partners. Toyota wants to be treated like Tesla, seeking subsidies such as tax breaks, policy support, and land subsidies.
In this regard, Toyota also changed its previous resolute denial attitude and became: "I don't comment on the rumors." The noncommittal answer implies that the news of Lexus's imminent localization is likely to be true.
From an ambiguous attitude towards localization to an active pursuit of localization, this actually reflects the reversal of Lexus's situation in China. It's just that it's really not too late for Lexus to localize at this time? Industry insiders believe that the only way out for Lexus localization may be to export the electric vehicles produced overseas with the help of the supply chain of China's new energy industry. However, even if it is exported overseas, Lexus will still be squeezed by independent brands such as BYD and Chery from China - localization will not completely solve Lexus's fundamental problems.
In this regard, Cui Dongshu, secretary general of the National Passenger Car Market Information Association, said that it is difficult for Toyota to build a wholly-owned factory in China, because the control of factory capacity at the policy level is very strict, and it cannot build factories in a disorderly manner. Therefore, whether it can be carried out in the end depends on whether its follow-up production capacity can be effectively guaranteed and whether it can reach a certain scale.
Repeatedly rejected the domestically produced Lexus
When it comes to the news that Lexus is about to be localized, we have to mention the rumors of Lexus localization that have been rumored many times before. Among them, the most typical is that at the end of 2017, Tianjin FAW Toyota's "new first production line project" introduced Toyota's new global global architecture of TNGA, which means that FAW Toyota has been able to share parts with Lexus models, and is even expected to be produced on the same line. At the time, this was seen as a positive message that Lexus was going to be localized.
However, as has been the case in the past decade when it has been reported that Lexus is about to be localized, Lexus' response has almost always been the same four words - false reports, as if its localization in China is a shameless self-depreciation.
Lexus has put forward a lot of specific sales targets for China's localization, such as annual sales of 30,000 units on localization, and later it finally mentioned this sales target to 100,000 units, but when it reached 100,000 units, Lexus said that there is no plan for localization at present, and put forward a higher localization standard - the sales of a single model reach 50,000 units before considering localization. This is like what we often call "painting a big pie", and Lexus's practice of repeatedly raising the standards of localization gives people the feeling that China is begging for its localization as soon as possible.
Ironically, when Lexus fully launched its global new factory plan in 2020, the outside world speculated that Lexus' new factory would land in China. However, the answer was unexpected, and the company chose India, where it sold only 550 vehicles a year, for its new global plant. This can be described as a proper "double standard" - "countless" sales targets have been put forward for localization in China, but the turn of the turn is on India's domestic production, which is almost negligible in sales.
In this regard, some industry insiders at the time believed that India's tariffs were too heavy, while China's tariffs were reduced from 25% to 15% in 2018, and some industry insiders said that there may be political reasons behind Lexus's Indian factory. In short, the Chinese market, which does not have a factory, has become the most profitable place for Lexus in the world.
In a sense, the above statement does make sense. In fact, the fundamental reason why Lexus was not localized in China before was that the mainland's tariffs on imported cars were gradually declining and Lexus's domestic sales in China were increasing year after year, which can be seen from the fact that the ES 200, which was originally priced at more than 260,000 yuan in 2018, was increased by 300,000 yuan all the way to pick up the car.
In addition, the short shipping distance and low cost from Japan to China may also be one of the reasons why Lexus has been reluctant to localize because it is not necessary. Of course, the most fundamental reason is the above-mentioned Lexus's low import tariffs, large sales and high profits. In this case, if Lexus chooses to localize, it will inevitably need to share profits equally with its joint venture Chinese automakers, which Lexus believes is unnecessary.
Why do you want to localize again at this time?
Regarding the recent news that Lexus will build a wholly-owned factory in Shanghai to produce pure electric vehicles, Toyota's response is different from the past: "I will not comment on the rumors. The fact that he no longer replied categorically to the "false report" shows that the matter is quite likely.
However, although Lexus seems to want to take the initiative to localize, this does not mean that things will definitely be done. While the Shanghai authorities are willing to attract foreign investment, this may require higher-level approval, which means that the negotiations between the two sides are far from complete and may even change, according to a person familiar with the matter.
Especially for Lexus, which has almost no advantages in electrification, its proposal of 100% sole proprietorship and hope to get treatment similar to Tesla's - tax exemptions, policy support, land subsidies and other requirements, logically seems to be difficult to get the support of the Shanghai authorities, after all, the reason why Tesla was able to build a factory in Shanghai is because Tesla has the world's leading technology and reputation in electric cars, and second, because of its large sales scale, It can contribute to Shanghai's GDP and employment.
In contrast, Lexus, which has no technology and no sales scale in terms of electrification, not only did not ask the Shanghai authorities in a low voice, but also put forward many requirements for Shanghai in terms of welfare benefits. So we can't help but ask: when the sales volume cannot be guaranteed, why did the Shanghai authorities take the trouble to invite the "uncle" of Lexus to supply?
The fundamental reason why Lexus has changed its ambiguous attitude in localization is that the sales of fuel vehicles have declined, and new energy vehicles are not competitive, which has been revealed since last year. Last year, Lexus sold 824,300 vehicles worldwide, a year-on-year increase of 32%, while its sales in the Chinese market were only 181,400 units, a year-on-year increase of 3%, but this increase was not only lower than the global growth, but also the smallest increase among all Lexus markets in the world.
From January to May this year, Lexus sold 72,300 vehicles in China, a year-on-year increase of 33.4%. Among them, the sales volume of Lexus ES series was 45,900 units, a year-on-year increase of 58.16%. However, despite the year-on-year increase in sales, this is in exchange for a sharp decline in the price of Lexus terminals, such as the maximum discount of the Lexus ES 200 Excellence Edition has reached 80,000 yuan, which is a world away from the need to increase the price to pick up the car in previous years.
In terms of electrification, Lexus currently has only one pure electric vehicle on sale in China, the RZ pure electric car, and two plug-in hybrid vehicles, the RX 450h+ and NX 400h+. RZ sold only 1,608 units from January to May this year, which is one-fifth of the monthly sales of its price range, the NIO ES6, in May. The sales of the two plug-in hybrid vehicles from January to May were 786 and 266 respectively, which is basically negligible.
In this situation, localization can allow Lexus to take advantage of the mature supply chain and advanced technology in the Chinese market, where new energy is most fully developed. Hiroki Nakajima, CTO, Vice President, and Executive Officer of Toyota Motor Corporation, said, "There is no doubt about the global position of electrification in the Chinese market, and the new models introduced in China will definitely be the majority in the BEV plan by 2026. Therefore, the importance of the Chinese market will not change in our minds, and Toyota will unswervingly promote the development of electrified products in the Chinese market in the future. ”
In this regard, Cui Dongshu said: "For the Lexus brand, if the domestic production is successful, it can bring more consumer confidence, further enhance competitiveness, and promote industrial integration. Because in the world, the new energy vehicle industry chain in the Chinese market is the strongest, and Lexus electric vehicles manufactured in China will definitely have more advantages than those produced in Japan. ”
Domestic Lexus, does anyone still buy it?
It's just that the ideal is always full, but the reality may not unfold according to the ideal. Whether Lexus can be localized is still uncertain, however, even if it is localized, will it really be able to open up market sales?
As a second-tier luxury brand, this is quite questionable. Lexus has always only regarded first-line luxury BBA and Porsche as its competitors, believing that as long as it closely follows these first-line luxury brands, it will not fall behind. However, no one expected that even the first-line luxury brands in Europe had to cut prices sharply in the face of the impact of China's independent high-end brands, such as Audi, Porsche, and BMW.
For example, the Audi A6L, which is larger in size and harder in brand, has a terminal preferential price of 338,000 yuan. Lexus, the "leader" of a second-tier luxury brand, how can it compete with Audi? What's more, there is also a BMW 5 Series with a preferential price of 339,900 yuan.
The fundamental reason for the price reduction of first-line luxury cars in Europe is the pressing of high-end luxury cars of domestic independent brands. According to the sales data, the M9 has been firmly in the domestic auto market for 9 consecutive weeks and ranks first in the sales list of luxury cars with more than 500,000 yuan (regardless of body form and energy form). If nothing else, this year it will replace the BMW X5 as the best-selling model of more than 500,000 yuan.
With BBA still under squeeze, can Lexus's attempt to rely solely on localization really reverse the decline in its sales in China? The problem may not be that simple. In the case that many independent luxury cars such as Ideal, Wenjie, and Weilai have a smoother in-vehicle system and a more advanced intelligent driving system and a cheaper price, even if Lexus, as a "foreign monk", is localized, I am afraid it will be difficult to suppress the "local snakes".