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Toyota Mulls Overseas Production of More Lexus Models Due to Strong Yen

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Old 07-06-12, 09:18 AM   #16
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Nothing was mentioned in the article, but I wonder if they'd ever consider expanding the number of markets for the ES?
in the article it says it wont sell in Japan, and Lexus Europe already said it wont be selling in Europe (outside Russia/Ukraine)... I dont really care for their reasoning, a lot of people in Europe never heard of Lexus so I dont see how ES300h would make things worse.

They need to expand their horizons... i am sure ES300h would become best seller within months here.
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Old 07-24-12, 07:03 AM   #17
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TOKYO (Reuters) -- Toyota Motor Corp is considering making more Lexus RX sport-utility vehicles for North America in Canada by expanding production capacity there and transferring some output from Japan, a source with knowledge of the matter said today.

Toyota's plant in Ontario, Canada, is the only factory outside of Japan that makes Lexus models. In 2011, the plant produced 65,000 RX SUVs, the best-selling Lexus model globally.

Grappling with a strong yen that makes it more expensive to export goods from Japan, Toyota has gradually been transferring some of its domestic production abroad, saying in principle it aims to make products near markets in which they are sold.

But Japan's biggest automaker has also repeatedly vowed to safeguard production of some 3 million vehicles a year in its home market, roughly triple the equivalent output at rivals Nissan and Honda.

Toyota plans to boost output capacity at its plant in Canada in early 2014, and is considering transferring production of about 30,000 RX SUVs to Canada from its Miyata factory in southern Japan, public broadcaster NHK reported earlier today.

Toyota produced about 81,000 RX SUVs at Miyata in 2011.

The total number of vehicles produced at the Miyata plant would likely be unchanged, as other models would be made instead of the RX, said the source, who declined to be named because he was not authorized to speak about the matter.

Toyota is set to make an announcement on the matter soon, the source said.

Earlier this month, the Miyata plant started production of the Lexus ES 2013 model, which will be exported largely to the United States and China, but will not be sold in Japan.
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Old 07-24-12, 07:51 AM   #18
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it's been obvious for a while that toyota/lexus will have to produce more outside japan. politically they have to say they're going to protect japanese jobs, and that may be possible for a while, but additional volume at some point will need to be built outside japan.

also, does anyone else think it's strange that all the talk about the ES being built in japan but they don't sell it there?
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Old 07-24-12, 08:33 AM   #19
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volume at some point will need to be built outside japan.

also, does anyone else think it's strange that all the talk about the ES being built in japan but they don't sell it there?
Not nearly as strange as Acura and Infiniti not even existing in Japan.
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Old 07-24-12, 08:47 AM   #20
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it's been obvious for a while that toyota/lexus will have to produce more outside japan. politically they have to say they're going to protect japanese jobs, and that may be possible for a while, but additional volume at some point will need to be built outside japan.

also, does anyone else think it's strange that all the talk about the ES being built in japan but they don't sell it there?
i think it is pretty stupid of them not to sell it in Japan or Europe...
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Old 07-24-12, 10:11 AM   #21
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i think it is pretty stupid of them not to sell it in Japan or Europe...
in europe i think it could do very well!
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Old 12-28-12, 03:10 AM   #22
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TOKYO (Reuters) -- When Toyota Motor Corp. President Akio Toyoda visited northern Japan in July last year and announced a $24 million engine plant expansion, some analysts saw it as evidence of a flawed strategy that put patriotism above profitability.

At the time, Toyota was struggling to rebuild its supply base after the March 2011 earthquake and tsunami and the yen was climbing toward a post-war record high against the dollar.

But the Miyagi Taiwa plant began assembling engines for the small hybrid Aqua, exported as the Prius C, this month with a welcome wind at Toyota's back: a weakening yen and a government-in-waiting determined to drive it lower.

Analysts say a continued slide in the Japanese currency could tip the competitive balance on pricing back in favor of Toyota and away from its toughest and fastest-rising global competitor, Hyundai Motor -- a new dynamic that would likely be repeated across other Japanese export industries.

Since early October, the yen has weakened about 8 percent against the dollar and 10 percent against the Korean won. Over the same period, shares in Toyota have jumped by 30 percent as investors reacted to the prospect of higher profitability on cars built in Japan for export, including Lexus luxury models.

"As the yen weakens, that very tight cost structure they have put in place to maximize profitability in an appreciated yen position allows them now to make a lot more profit," said Larry Dominique, an analyst at U.S.-based TrueCar.com and former Nissan executive.

"With the Korean currency appreciating, I would expect that what you would see (for Hyundai) is some of the same issues that the Japanese faced over the past several years."

Hollowing out

Whether the strategy of driving down the yen works to slow the "hollowing out" of Japanese manufacturing will be key for Japan's new government under Liberal Democratic Party chief Shinzo Abe, who is pushing for super-easy monetary policy to weaken the yen and lift pressure on exporters like Toyota.

The yen's rise in recent years has hurt Japan's exporters across the board, including industries like electronics and shipbuilding where competition with Korean rivals is also fierce. The number of Japanese factory workers fell 13 percent to about 10.4 million between 2002 and 2011.

But Toyota has been the slowest to abandon production in Japan - a conservative position that would make it the biggest beneficiary if the yen were to drop sharply now.

For his part, Toyoda has showed no signs of budging from a vow to make at least 3 million vehicles a year in Japan. Toyota engineers say the strategy allows them to keep suppliers close and drive innovations at "mother plants" in Japan which can provide guidance on cost-cutting for overseas plants.

By contrast, Nissan under Chief Executive Carlos Ghosn has been aggressively moving production offshore.

Under Ghosn, Nissan shifted production of its "March" subcompact - 1 of its top-sellers in Japan - to Thailand from Japan and has scrambled to buy more parts made overseas, including South Korea. Just 20 percent of Nissan's global production now originates in Japan, down from 50 percent five years ago. For Honda, Japan accounts for 26 percent of its total production, down from 34 percent in 2007.

For Toyota, the comparable figure is 40 percent, down from 50 percent in 2007.

As a result, Toyota is much more sensitive to the yen exchange rate than its Japanese rivals. Toyota operating profits fall by 35 billion yen for every 1-yen drop in the value of the dollar. For Nissan, that comparable figure is 20 billion yen and for Honda 16 billion yen, the companies have said. Gains of the same proportion could be expected from a weakening yen.

"Toyota is the 1 that is hit the hardest when the yen is high," said Koji Endo, an autos analyst at Advanced Research in Tokyo. "But it is also the 1 that benefits the most when the yen is low."

'How did he do that?'


Analysts point to Hyundai's recent success as an example of how a smart manufacturer can use the pricing power of a weak currency to undercut rivals.

A video that went viral at the Frankfurt auto show in 2011 caught Volkswagen Chairman Martin Winterkorn in candid admiration at Hyundai's quality gains. The video, which was widely circulated among auto executives, shows Winterkorn admiring the interior of a Hyundai i30.

Speaking to an entourage, Winterkorn notes that the windshield wipers are hidden from view -- as they would be on a more expensive car -- and that the steering wheel makes no sound when adjusted. "How did he do that?" Winterkorn asks about Hyundai. Off camera, a VW engineer can be heard to chime in: "We had a solution but it was too expensive."

Similarly, Hyundai has used a weaker won to help target Toyota's luxury Lexus brand. That is similar to what Lexus did to Mercedes and BMW in 1990 when it went from nowhere to become the top-selling U.S. luxury brand. At the time of the Lexus launch, the dollar was trading near 130 yen.

But in recent years, Hyundai has become the value leader. The top-of-the-line Hyundai Equus starts at $67,150 for 2013, an increase of just 1 percent over the previous year.

The sedan built at Hyundai's Ulsan plant also comes packed with features like 19-inch chrome wheels and a massage unit for the VIP seat in the rear as well as for the driver. Hyundai also promises that anyone who buys an Equus will never have to visit a dealer for service. Staff pick up the car at a home or business and replace it on the spot with a loaner.

By contrast, the strong yen forced Toyota to hike the price of the competing Japan-built Lexus LS 460L by 8 percent on the all-wheel-drive model for 2013 to $82,670.

Toyota could take advantage of a weaker yen now to address those pricing gaps and to add features where it has skimped. The Prius C built in Iwate in northern Japan, for example, was designed to be priced about $4,000 below a full-size Prius in the United States, Toyota's largest and most profitable market.

But Consumer Reports panned the hybrid for what it called a cheap-looking plastic interior and bad road noise.

Tough choices


A stronger won now could force tougher choices on Hyundai and its affiliate, Kia Motors, analysts and executives say. In recent years, Hyundai Motor's operating margin averaged 8.1 percent when the won weakened against the yen compared with a leaner 6.5 percent when it was strengthening, according to Thomson Reuters calculations.

A study by researchers at the Korea Automotive Research Institute released this month found South Korean auto exports shrink by 1.2 percent annually with every 1 percent decline in the value of the yen against the won.

"We are agonizing over the firming won," said 1 Kia executive, who asked not to be named because he was not authorized to speak about strategy.

But for the currency changes to have deep and lasting effects, they would need to be sustained, analysts and executives said. Automakers need 4 to 5 years to design a new model and shift suppliers. And in the end, every automaker has the same goal - to neutralize the impact of exchange rates by building more vehicles in the markets where they sell.

At the same time, a weaker yen remains more speculative than real, industry executives caution.

"It is wrong to say the yen is weak," Toyoda said last week. "The yen is still super strong at the current level."
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Old 12-28-12, 05:44 AM   #23
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8% is tiny... it needs to go back over 100yen for them to really profit. When Toyota made huge profits, Yen was 120x. And Korean Won dropped a lot more in past few years than that too.
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Old 12-28-12, 08:28 AM   #24
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Originally Posted by bitkahuna View Post
it's been obvious for a while that toyota/lexus will have to produce more outside japan. politically they have to say they're going to protect japanese jobs, and that may be possible for a while, but additional volume at some point will need to be built outside japan.

also, does anyone else think it's strange that all the talk about the ES being built in japan but they don't sell it there?
This was inevitable. But it's a solid business decision. The same kind of thing which drove Infiniti to make similar decisions (one which drew sharp criticism from many here) about producing more of its cars in Europe and China.
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Old 12-28-12, 08:32 AM   #25
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This was inevitable. But it's a solid business decision. The same kind of thing which drove Infiniti to make similar decisions (one which drew sharp criticism from many here) about producing more of its cars in Europe and China.
it is not just that they want to protect Japanese jobs though... at the end, it comes down to the fact that they need to produce at least 100k cars per year for plant to be viable.

And no Lexus product sells in similar numbers for one market than RX. This is why we have RX being produced in NA.
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Old 12-28-12, 01:31 PM   #26
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it is not just that they want to protect Japanese jobs though... at the end, it comes down to the fact that they need to produce at least 100k cars per year for plant to be viable.

And no Lexus product sells in similar numbers for one market than RX. This is why we have RX being produced in NA.
No argument there. It makes perfect sense to produce vehicles in the same country where they are sold. But the high yen is chasing a lot of production out of Japan, and it's not just cars either. It's many facets of Japanese industry.
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Old 12-28-12, 03:03 PM   #27
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at the end, it comes down to the fact that they need to produce at least 100k cars per year for plant to be viable.
The ES will be come down the same line as the Avalon in Kentucky very shortly. Combined they exceed 100k
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Old 12-28-12, 04:51 PM   #28
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I was talking to my dad about this and he said if the ES is not made in Japan, he will not buy it. All cars he has ever owned have been made oversees, whether it was Mercedes or lexus. The first car he bought made in the US was the ML320 and it ruined his experience with Mercedes. The RX350 we have was for my mom, its ok but he really would have preferred a Japanese one. Even if the car is the same, its just one of those things that is a deal breaker.
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Old 12-28-12, 10:01 PM   #29
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I really hope the Yen continues to weaken. It's blatantally obvious interiors is where they've cut corners due to the yen and I sure hope that if it continues to fall they add back the things they've cut over the years. The lower portion of the ES dashboard needs to be soft touch plastic and the Camry and Corolla need better interiors and content for their classes.
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Old 12-28-12, 11:10 PM   #30
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The ES will be come down the same line as the Avalon in Kentucky very shortly. Combined they exceed 100k
Most likely the ES would be built along side the RX in Canada before it would be built in the U.S. The RX sells 2 to 1 compared to the ES. We'll have to wait and see what Toyota does...
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