In fact, in the 20 years since it entered the Chinese market, Lexus has more than once reported that it will be localized, and even the official has made two bets on when it will be localized, but it has not been successful. Recently, the news of the localization of Lexus has once again appeared in the newspapers.
The difference is that Lexus was previously rumored to be localized because the sales were sold too well, but this time it was the opposite, and the industry analysis was to transform new energy and stimulate sales.
Recently, at Toyota's GR Carnival in Shanghai, 68-year-old Toyota Chairman Akio Toyoda personally went into battle and performed a difficult drifting show on the track, and announced that GR Yaris would be introduced to China.
Along with the rumors of the localization of Lexus. Gasgoo has learned that Toyota is discussing with the relevant authorities in Shanghai the possibility of building a wholly-owned plant in the local area to produce Lexus cars.
In this regard, Toyota said that it would not comment on the rumors.
According to people familiar with the matter, Toyota hopes to have similar treatment to Tesla's Shanghai factory, including tax reductions, policy support, land subsidies, etc., and the new plant will focus on pure electric models. The above news is also believed by the industry that Lexus will be produced domestically.
Image credit: Lexus
Why is Lexus not produced in China?
The localization of Lexus seems to be a never-ending puzzle.
In 2004, Lexus officially entered the Chinese market, and then established independent Lexus franchise dealerships in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen.
In the following years, Lexus's sales in the Chinese market have been rising, and the issue of localization has been repeatedly mentioned.
Zeng Lintang, who was the general manager of Lexus China at the time, said: "When the sales volume reached 30,000 units that year, we could consider domestic production. After that, Zeng Lintang made another bet: "From an economic point of view, only a model with annual sales of 3 to 40,000 units can consider the issue of localization." ”
Later, Yuan Zhongrong, then the executive deputy general manager of Guangzhou Toyota, also let out the wind, "Lexus will consider domestic production when its annual sales reach 50,000 units." ”
In 2012, Lexus raised the bet to 100,000 units again, believing that if annual sales reached 100,000 units, it would consider domestic production.
Although the above bets were later realized, the Lexar localization bet has been abandoned.
In 2013, when Nissan Infiniti and Honda Acura established a joint venture to produce Lexus, Hiroshi Onishi, then general manager of Toyota China, also publicly expressed his intention to start production of Lexus in China at the Shanghai Auto Show that year.
I thought it was a sure thing, but in the end, it didn't happen.
Image credit: Lexus
At that time, industry analysis was that Toyota was reluctant to share profits with the joint venture, and second, Lexus had skilled skilled workers in Japan, and used the production and parts supply platform shared with Toyota to minimize costs. Third, domestic production also has to face the choice of two joint venture factories in the north and south.
In addition, there are analysts who say that the performance of Infiniti and Acura's localization failure has made Lexus's intention to localize come to naught.
In 2018, FAW officially issued a document mentioning that it would introduce the Lexus luxury brand. However, this has also become FAW's self-congratulation. Lexus (China) issued an official response saying that "Lexus does not yet have a specific time for localization". It can also be seen that Lexus is entangled in localization.
However, with the loosening of the joint venture equity ratio, the localization of Lexus has ushered in a turning point.
Since January 2022, restrictions on foreign ownership in passenger car manufacturing have been lifted in China's automobile manufacturing sector.
On June 24 this year, Xin Guobin, Vice Minister of the Ministry of Industry and Information Technology, said that the Ministry of Industry and Information Technology has fully implemented the high-level opening-up policy and vigorously supported the development of multinational companies in China.
The more open business environment has made Lexus have no worries, and localization seems to be just one step away.
However, a person familiar with the matter said that the Shanghai authorities are willing to attract more foreign investment, but may require higher-level approvals, which means that the negotiations between the two sides are far from complete and may even change.
"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 be built 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. Cui Dongshu, secretary general of the passenger association, commented on this.
It's not as good as it used to be
From annual sales of 30,000 units, to annual sales of 30,000 bicycles, to annual sales of 50,000 units, and finally to annual sales of 100,000 units, it can be seen that the premise of localization has been rumored many times in the past, mostly because of the continuous increase in sales of Lexus.
And this time, Lexus's background in China is not good.
According to the data, Lexus's sales in China exceeded 100,000 units for the first time in 2016, reaching 109,200 units, and four years later (2021), Lexus's sales in China successfully doubled to 227,000 units. This was also the peak of Lexus. However, in 2022, Lexus's cumulative sales plummeted, falling by 24.5% year-on-year, and finally ended hastily with cumulative sales of 176,000 units. In 2023, it will increase slightly by 3% to 181,400 units.
In contrast, Lexus's global sales are growing substantially.
In 2023, Lexus will sell a total of 824,000 new cars worldwide, an increase of 32% year-on-year, of which North America is the largest market, with 355,000 units sold, a year-on-year increase of 24%; sales in the Japanese market were 94,000 units, a year-on-year increase of 129%; Europe and the Middle East also grew by 46 percent and 60 percent, respectively. The Chinese market's share of Lexus' global share fell from 28% to 22%.
From January to May this year, Lexus's cumulative sales in China increased by 28% year-on-year to 69,000 units, but this seemingly glamorous sales volume is also the result of its price reduction and profit.
You must know that Lexus was previously known as the king of value preservation and price increases, and it is the norm for its hot-selling model ES to increase the price by 20,000 yuan, and the LM model even has to increase the price by 800,000 yuan. Later, despite the huge government fines, Lexus did not stop raising prices.
Lexus has also made a lot of money in China, which is one of the reasons why Lexus has been slow to make domestic production.
Looking at the present, not only have all Lexus models not increased their prices, but even most models have seen price reductions. For example, the main sales models ES and NX have a terminal discount of about 50,000 yuan.
According to some news, some areas even gave a price reduction of 100,000 yuan, which is rare for Lexus.
If you need new energy, you need to localize
In fact, second-tier luxury brands, including Lexus, have all experienced price cuts and sales declines without exception, mainly due to the slow transition to new energy.
How to save sales and accelerate the transition to new energy is a hurdle that Lexus cannot bypass.
In fact, as early as 2021, Toyota officially planned that by 2030, the Lexus and Toyota brands will sell 3.5 million pure electric vehicles worldwide.
And Lexus is the vanguard of Toyota's transformation to new energy. It is expected to take the lead in achieving 100% pure electric vehicle sales in China, North America and Europe by 2030, and the annual global sales will reach 1 million units; By 2035, the company will become fully electrified globally.
To this end, at this year's Tokyo Motor Show, Lexus unveiled the Lexus LF-ZC concept model, and said that it will start the transformation phase of the brand into electrification in 2026.
However, the new energy transition is naturally inseparable from the Chinese market. Relying on the Shanghai factory, Tesla has rapidly grown into the world's leading new energy vehicle company. Foreign-funded enterprises such as Volkswagen and General Motors have also accelerated the pace of new energy transformation in China.
Toyota Motor President Tsuneji Sato once said, "The Chinese market will play a very important role in the process of Lexus's electrification transformation. ”
Therefore, the industry believes that whether it is to maintain China's sales or to transform new energy, the localization of Lexus will be of great help to it.
Image credit: Lexus
Today, China has developed into the world's largest new energy vehicle market, with a mature supply chain system. If Lexus is not localized, it will inevitably bear greater cost pressure, which will then affect the competitiveness of its products.
Taking Volkswagen as an example, the Volkswagen ID.3 is priced at only 125,900 yuan (about 16,000 euros) in China. In the German market, the starting price of the Volkswagen ID.3 is about 40,000 euros (about 320,000 yuan). The price difference of 200,000 yuan has even caused dissatisfaction among German consumers.
In this way, if Toyota wants to use Lexus as a pioneer in entering new energy, localization seems to be a necessary action.
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. ”。