Lexus aloof from China production while Nissan, Honda step in
05-03-14, 11:07 AM
#1
Lexus aloof from China production while Nissan, Honda step in
(Reuters) - The head of Lexus, the premium brand of Toyota Motor Corp (7203.T), said on Sunday an emphasis on quality had kept it from manufacturing in China.
Unlike German peers Audi, Volkswagen AG's (VOWG_p.DE) luxury division and BMW (BMWG.DE), Lexus imports all of its vehicles sold in China, from Japan.
But high tariffs charged on imported cars make it hard to generate volume and last year, Lexus sold around a seventh of Audi's tally and a fifth of what BMW sold in China.
Tokuo Fukuichi, the head of relative newcomer Lexus, said at the Auto China car show that he prioritises the quality of vehicles over quantity.
"The German Three have a brand image that they have cultivated over the past century in their long history, but Lexus is not in people's minds like that yet," said Fukuichi, who is also Toyota's Senior Managing Officer, referring to Audi, BMW and Mercedes-Benz (DAIGn.DE).
"Customers would leave us if we have any problems with quality because that is what they are seeking in a Lexus," he told Reuters.
Fukuichi said that Lexus has been considering the possibility of manufacturing in China but no specifics were being discussed and nothing has been decided.
Lexus, which was launched in 1989, took nearly 15 years to start manufacturing outside of Japan at a plant in Canada. It still makes much of its vehicles in Japan but last year it said it will also start production in its biggest market, the United States, in 2015.
Its choice to import its vehicles into China, Lexus's second biggest market, has kept prices high. The entry-level Lexus ES, the brand's best-selling vehicle in China, has a starting price of about $57,700 (34,324.81 pounds) there, compared to $36,620 in the United States.
NISSAN'S INFINITI
Other Japanese premium brands have already made a move to start production in China.
Nissan is set to start manufacturing its luxury arm Infiniti's Q50 sedan and QX50 crossover at an existing Nissan plant in Hubei province later this year, while Honda (7267.T) aims to build Acura in China from 2016.
Infiniti's President Johan de Nysschen said that production in China may initially turn out to be more expensive than making vehicles in Japan because there could be less economy of scale.
But overall product pricing would become more competitive without tariffs and locally made parts tended to cost less, he said.
"You cannot compete against your localised competition with an imported car," he told Reuters.
China's premium car demand is likely to reach 2.7 million cars a year by 2020, which would make China the world's biggest premium car market ahead of the United States.
In 2013, Lexus sold around 70,400 vehicles in China, up 16 percent from a year ago, according to data from LMC Automotive. Lexus does not disclose China sales figures.
Lexus unveiled its new NX compact crossover SUV at the auto show on Sunday, which competes with Audi's Q3 and BMW's X1.
Unlike German peers Audi, Volkswagen AG's (VOWG_p.DE) luxury division and BMW (BMWG.DE), Lexus imports all of its vehicles sold in China, from Japan.
But high tariffs charged on imported cars make it hard to generate volume and last year, Lexus sold around a seventh of Audi's tally and a fifth of what BMW sold in China.
Tokuo Fukuichi, the head of relative newcomer Lexus, said at the Auto China car show that he prioritises the quality of vehicles over quantity.
"The German Three have a brand image that they have cultivated over the past century in their long history, but Lexus is not in people's minds like that yet," said Fukuichi, who is also Toyota's Senior Managing Officer, referring to Audi, BMW and Mercedes-Benz (DAIGn.DE).
"Customers would leave us if we have any problems with quality because that is what they are seeking in a Lexus," he told Reuters.
Fukuichi said that Lexus has been considering the possibility of manufacturing in China but no specifics were being discussed and nothing has been decided.
Lexus, which was launched in 1989, took nearly 15 years to start manufacturing outside of Japan at a plant in Canada. It still makes much of its vehicles in Japan but last year it said it will also start production in its biggest market, the United States, in 2015.
Its choice to import its vehicles into China, Lexus's second biggest market, has kept prices high. The entry-level Lexus ES, the brand's best-selling vehicle in China, has a starting price of about $57,700 (34,324.81 pounds) there, compared to $36,620 in the United States.
NISSAN'S INFINITI
Other Japanese premium brands have already made a move to start production in China.
Nissan is set to start manufacturing its luxury arm Infiniti's Q50 sedan and QX50 crossover at an existing Nissan plant in Hubei province later this year, while Honda (7267.T) aims to build Acura in China from 2016.
Infiniti's President Johan de Nysschen said that production in China may initially turn out to be more expensive than making vehicles in Japan because there could be less economy of scale.
But overall product pricing would become more competitive without tariffs and locally made parts tended to cost less, he said.
"You cannot compete against your localised competition with an imported car," he told Reuters.
China's premium car demand is likely to reach 2.7 million cars a year by 2020, which would make China the world's biggest premium car market ahead of the United States.
In 2013, Lexus sold around 70,400 vehicles in China, up 16 percent from a year ago, according to data from LMC Automotive. Lexus does not disclose China sales figures.
Lexus unveiled its new NX compact crossover SUV at the auto show on Sunday, which competes with Audi's Q3 and BMW's X1.
05-03-14, 01:35 PM
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Makes sense. People will buy mercedes no matter what, even through the dark years of the 90s in the US
Aloof is a bit harsh. That implies they don't have good reason to stay out of China
Aloof is a bit harsh. That implies they don't have good reason to stay out of China
05-03-14, 01:54 PM
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"The German Three have a brand image that they have cultivated over the past century in their long history, but Lexus is not in people's minds like that yet," said .
05-03-14, 08:18 PM
#7
Lexus Champion
But, Toyota has been assembling the Prius in China in 2005 and is now trying to find local sources for their hybrid-specific parts, in an effort to bring costs down in China.
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07-31-14, 04:20 AM
#11
AutoNews
Lexus has no plans to join the rush of carmakers manufacturing in China because it has to learn to crawl in that market before it runs, a top executive says.
Lexus remains the only major luxury brand with neither a plant in the world’s biggest vehicle market nor plans to open 1. Its sales there have been constrained because all models sold in China are made overseas and get hit by the country’s hefty import duties.
Nonetheless, leaving a China factory out of Lexus’ growth plans is fine with Lexus International Executive Vice President Mark Templin.
“I think we’re still in the crawling stage,” Templin said of Lexus’ business in China. “If you’re going to go there and build cars, to me, that’s running.
“I don’t think we’re ready to run yet,” he told Automotive News.
No conversations
Mercedes-Benz, Audi, BMW and Cadillac already make vehicles in China. Japanese rivals Infiniti and Acura have said they will do so, too.
But Lexus has no clear timeline for production in China and isn’t even seriously considering a factory there.
“We don’t have those conversations,” Templin said. “We haven’t gotten to the point where we have serious conversations about building cars in China yet.”
The immediate priority is building the brand in the country, where German badges are coveted as the epitome of premium and Japanese brands have often been shunned because of political tensions between the governments in Beijing and Tokyo.
“We’re only 10 years into the China market right now,” Templin said. “We’re worrying about developing the brand, making sure people know what we stand for, rolling out a dealer network that’s capable of taking care of customers.”
Modest
Lexus sales in China have been so modest that the brand only recently began disclosing the figures.
In calendar year 2013, Lexus sold around 73,000 vehicles in China, 13 percent more than the year before. It sells every model in its lineup there except the HS hybrid.
By comparison, Audi, the luxury leader in China, sold 492,000 vehicles there in 2013, a gain of 21 percent. BMW’s 2013 China sales rose 20 percent to 391,000, while Mercedes-Benz sales rose 11 percent to 218,045.
07-31-14, 06:06 AM
#12
I'm really Glad to hear this.. I only would buy a Jpn branded cars built in America or Japan itself. There are many reasons to stay out of China besides the obvious reasons.
Infiniti / Nissan in China, I think this is a grave mistake because they already have some issues with their cars built at home in Jpn, and building in China will only complicated their matters worse. Infiniti has been struggling with its brand for past decade and now wants to sell more volume (that may seem good on paper) but IMO building in China will be Infiniti's downfall out of the Prem/Luxo image.. (bye, bye Infiniti) I actually like Infiniti cars and this is just terrible news for consumers that like Infiniti.
Kudos to Lexus for not selling out to building in high-producing volume China factories. Our economy is already crippled by the volume of products we import from china (cheap everything). I don't think as a Luxury buyer that I want a Car made in China. I personally don't care if it says Mercedes or BMW made in China I will avoid them like the plague if so.
Toyo/Lex is WISE. They currently sell the most of their vehicles to North America so its wise to start manufacturing some of the high volume cars in Canada and soon in the U.S. Why would they operate out of China to save a few million by sacrificing on quality and other issues associated with China. Plus Japan and China aren't that good of friends so I can see why things are the way it is.. Many variables not just one or two reason why Toyo / Lex will not build in China. and that I'm HAPPY to know my next Lexus won't have a "Made in China" stamped on it..
Infiniti / Nissan in China, I think this is a grave mistake because they already have some issues with their cars built at home in Jpn, and building in China will only complicated their matters worse. Infiniti has been struggling with its brand for past decade and now wants to sell more volume (that may seem good on paper) but IMO building in China will be Infiniti's downfall out of the Prem/Luxo image.. (bye, bye Infiniti) I actually like Infiniti cars and this is just terrible news for consumers that like Infiniti.
Kudos to Lexus for not selling out to building in high-producing volume China factories. Our economy is already crippled by the volume of products we import from china (cheap everything). I don't think as a Luxury buyer that I want a Car made in China. I personally don't care if it says Mercedes or BMW made in China I will avoid them like the plague if so.
Toyo/Lex is WISE. They currently sell the most of their vehicles to North America so its wise to start manufacturing some of the high volume cars in Canada and soon in the U.S. Why would they operate out of China to save a few million by sacrificing on quality and other issues associated with China. Plus Japan and China aren't that good of friends so I can see why things are the way it is.. Many variables not just one or two reason why Toyo / Lex will not build in China. and that I'm HAPPY to know my next Lexus won't have a "Made in China" stamped on it..
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