mikez

Lexus also changed their Chinese name

ba-b4

I think it's human nature to have less forgiveness towards outsiders vs. one's own people. Basically it's like if you get beaten up really bad by your parents even as a kid you might thing there might be a reason for it. But if you get beaten up in the street by a total stranger it's a whole different thing.

Kaydee

HK and taiwan would be an exception since most chinese clone cars are not exported there. But here in the mainland (where it matters) the Lexus brand needs an image bad. I'm sure Lexus would gladly trade both its HK and Taiwan sales for Mainland sales.

GS69

Why Lexus Doesn't Lead the Pack in China
A late start and high taxes have left Toyota's luxury brand stuck behind rivals

Even after a series of embarrassing recalls last year, Toyota Motor's (TM) Lexus managed to remain the No. 1 luxury vehicle maker in the U.S.—a spot it's held for 11 years running. In China, however, it's an also-ran. Lexus sold just a 5th of luxury leader Audi's tally last year in the world's biggest car market. It also trails BMW and Daimler's Mercedes.

To bolster Lexus's standing in China, Toyota is turning to the feature that cemented its early success in the U.S.: extreme customer service. Showroom amenities such as cappuccino machines, Wi-Fi, Lego tables for the kids, and airport shuttles for busy executives dropping off their cars for servicing—now-standard touches among luxe brands in America—took root in Lexus's signature tan and black dealerships in the U.S. during the 1990s.

To learn the latest in consumer coddling, Toyota is embedding 2 Chinese managers at Lexus's U.S. headquarters in Torrance, Calif. They'll stay a year to learn all aspects of the luxury brand's operations, rotating through sales, marketing, and customer service. Then they'll return to instruct Lexus colleagues back home. "The U.S. is the most sophisticated auto market in the world, in terms of our capabilities," said Mark Templin, head of U.S. Lexus sales.

The same can't be said for Lexus in China; "nothing stands out from Lexus's service," says Maggie Lin, a 32-year-old owner of a decorative stones business in Foshan who owns an imported Lexus RX sport-utility vehicle and an Audi A6 sedan. "I don't feel there's anything special compared with what Audi has been doing. They are more or less the same." Although Lexus sales in China grew 61%, to 49,000 cars, last year, Audi sold 236,000, says J.D. Power and Associates.

Lexus is adapting its models to fit local tastes. "Consumer needs are not all the same in each market," explains Takeshi Uchiyamada, Toyota's executive vice-president for research and product development. "In China, within the Lexus lineup we're introducing smaller-engine cars favored by Chinese customers." Examples include the recently added IS 250 sedan and IS 250C convertible, whose 2.5-liter engines are much smaller than the 3.5-liter found in the RX SUV popular in the U.S. Lexus plans to sell a new entry-level hybrid Lexus, the CT 200h, later this year that will have sportier handling than Toyota's Prius. The model, promoted as the "darker side of green," will compete with BMW's 1 Series, the Audi A3, and Mercedes's B-Class models.

John Zeng, a Shanghai-based analyst for J.D. Power, says Toyota is at a disadvantage because it imports all the Lexus cars it sells in China. Importers pay a 25% custom duty and a 17% value-added tax. There's also a consumption tax, based on engine size, that can reach 40%. That can make Lexus prices too high for younger buyers, Zeng says. "Toyota insists on producing Lexus in Japan," he says. "But if you want to achieve the volume of your competitors, you have to follow your competitors' strategy. BMW, Audi, Mercedes—they are all focused on localizing production of their models."

Analysts say Toyota has been reluctant to entrust non-Japanese plants with the luxury brand because they want to control quality and protect intellectual property. The automaker is also moving forward cautiously after a year of recalls globally for problems including quality glitches in Lexus models. "Especially now, we're not going all out to go as fast as we can in China," says Karl Schlicht, head of the brand's global product and marketing division. "We've learned a big lesson."

Lexus's underdog status is partly due to its later entry into China. It opened its 1st dedicated showrooms there in 2005, after beginning imports in 1993. Audi, the favored brand of Chinese bureaucrats, is owned by Volkswagen, which entered the market in 1985.

Globally, Lexus sales have failed to take off in major markets outside of the U.S. In Japan, sales reached 33,400 cars last year, about half the company's original target when the brand was introduced there in 2005. By contrast, Lexus's U.S. sales rose 6.2% in 2010, to 229,329. While worldwide sales rose 12%, to 410,000 cars, that's less than a 3rd of luxury car leader BMW's deliveries of 1.46 million cars.

Even if Lexus becomes China's customer-service champ, it may not lure more buyers, says Beijing Mercedes owner **** Jun. "The Chinese market is still a seller's market," **** says. "People pay more attention to brand reputation, quality, and price rather than dealer services."

The bottom line: To catch Audi, Lexus is improving customer care in China, where J.D. Power predicts luxury sales will triple by 2015, to 1.4 million vehicles.

G Star

iTrader: (2)

BMW has a very very favorable standing in China. Not just in the auto industry but they are now the most desired brand in China. Yes, even over Apple and LV.

Lexus has some work to do, in my opinion what could be their ultimate savior was their first selling point. Pure and explicit LUXURY, plush soft rides, quality interiors plus extra care customer service is what can get them in the game in China.

I8ABMR

I think if Lexus is going to compete with the Germans in markets outside N America they will need to stop producing the models with V6s and V8s and start some diesel, and 4 cylinder models. Mercedes has the A class and BMW has the 1 series and the mini. Lexus has............nothing to compete. They have to stop relying on toyota for their small cars sales and focus on "premium compact" models

spwolf

CT200h :-)


Lexus has been for long US tailored, and thats why it sells so well in the USA and less well in the World.

seanlee

lexus doesn't entrust quality outside of japan? silly me. i thought Rx was made in Canada.

spwolf

i guess it entrust "expensive" :-)

GS69

I read that to mean that they do not trust Chinese quality ...

seanlee

i think you should have read the report before posting? just an advise

"Toyota insists on producing Lexus in Japan"
"Analysts say Toyota has been reluctant to entrust non-Japanese plants with the luxury brand"

it is important to note that unlike in U.S. where entry level Lexus is better than top level Toyota, in Asian market, especially in Japanese and China, you have Toyota Crown. it is in every way, shape or form competes with Lexus GS (yes, there is a Toyota crown hybrid)

and they sold over 45161 in year 2010 in china.

seanlee

i was going to stop here, but i believe i should give you guys some more information before i go.

the cheapest lexus in china, is IS250 that has the starting price of 370k RMB, or 56k USD.

next cheapest one is ES is ES240 that has starting price of 400k RMB, or 61.5k USD.

RX270 starts at 500k RMB, or 77k USD. the RX350 cost 792kRMB, or 121k USD.


so, how does that compare to BMW/MB?

let's see
Audi A4 1.8 starts 291k RMB, or 44k USD. the 2.0T starts 309.8k RMB. A6 start 355k RMB. Q5 starts 379.8k RMB.

BMW 3 starts at 280k RMB. 5 starts at 418.6k RMB.

Benz C starts 308k RMB, and E start 465k RMB.


the result is very clear, you get to be an id*ot to buy a ES240 instead of BMW 5, right?

granted, compare to the imported cars, lexus' pricing is not outrageous, and guess what? Lexus sold the most amount Chinese imported market.

it is clear. if lexus want to sell more, they have to start manufacturing cars in China, or forever be priced 30% higher than the competitor's entry level cars.

SaintNexus

So, once Lexus decides to open a plant in China and start making their cars there, the prices will drop to help improve sales, right?

From what i understand, Lexus is being charged 25% for custom duty, and 17% for value added tax.

Once they bypass this, I'm sure their sales will incline pretty rapidly, i hope.

G Star

iTrader: (2)

It is just a fact, when I bring up Lexus to my connections in China, they usually scoff at me and say how much they prefer Benz. Only the few that appreciates cars will feel intrigued when I bring up lexus and their luxury ride, attention to detail.

I must admit though, when it comes to the upper echelons like S class and CL class, the competition is very close between the two.

Chinese market is very 'special' and is considered a chance of a lifetime for an unpopular brand to become a powerhouse.

One particular example I can think of now is Dunhill, how many Americans even know about Dunhill? it is one of the most highly regarded brands in China right now.

grabber2

Lexus need to build their car in China inorder to void the import tax.......people in China cares more about money. BMW 320i , Audi 1.8 & Benz C200 all build & sell great in China for under $300,000Y where as a Lexus ES goes for $400,00Y. My SC430 cost $980,000Y ($140K USD) in China.....I was in China on Sept 2010 & they are selling a Benz C200 for $230,000Y ($30K USD), why not its still a Benz!!!