Hoovey689

iTrader: (16)

Lexus in no hurry to be a big player in China

For a while now, China's spiraling wealth, population and development has had the world's luxury automakers in an expansionist fervor, with many executives exhibiting the sort of gleefully maniacal behavior historically reserved for gold-rush prospectors. Yet Toyota, of all companies, is exercising a surprising amount of caution in the Asian nation.

As The Wall Street Journal notes, Toyota's premium brand, Lexus, sold all of 64,000 vehicles in China last year, while BMW cleared its books of 326,000. In fact, it didn't even bother entering the market until 2005, while rival Audi built its first car in the market a decade and a half earlier. Even now, Lexus doesn't build any vehicles in China, and with the country's notoriously high tariffs on imports, that's a major disadvantage. Yet the business daily quotes Lexus executive vice president Mark Templin as saying that the brand is nowhere near ready to start building cars in the market. "We're not having those discussions about when we're going to go to China... We have a lot of work to do before we get to that point."

Part of that work includes establishing a more expansive dealer network – Lexus only had 99 stores as of 2012, while rival Mercedes-Benz had over two-and-a-half times as many, and it's still expanding. Adding a lot of dealers without having a goodly number of competitively priced offerings for them to sell may seem like an odd strategy, but Templin tells the WSJ that the goal is to "cultivate our image for quality and customer service and let the customers that we have go tell that story for us."

http://www.autoblog.com/2013/06/03/l...ayer-in-china/

Whitigir

To be honest. In China, they Hate Honda and Toyota, even more now. There is no wonder why other brands are doing so good, and the best are Buick

grabber2

There are quite few reason that Lexus is not doing good in China.

1. Price, its more expensive than the German due to import tax. (you want to pay $80K for IS250 or a $45K for a 328i/A4/C200)
2. National issue with Japan,
3. Status - In general, European product = more classy. (According to most Chinese)
4. Safety - looking at some crazy accident in China, German tend to be strong than Japanese

Reliability doesn't mean a lot compares to the above.

gengar

Not a bad position to take, given the massive slowdown in the Chinese economy recently. Some of the aggressive manufacturers may find themselves dealing with overexpansion.

mordecai

Not true actually. While there have been some negative sentiments since last summer, the effect on car sales were over after 6 months. The people I met while I was in Beijing loved Japanese cars, even if half of them owned German cars.

mordecai

Another thing, it seems Lexus is looking to grow "naturally" instead of being aggressive and trying to gain market share by increasing its sales channels and marketing. I'm not sure if they have the right strategy. It may be a smart thing to do while they wait for sentiment to become positive again.

mrraider

Buick has better standing in china than Lexus. Toyota is in need of serious image makeover before they become palatable to the Chinese market. Of course GM will say the same thing about teh Japanese domestic market.

spwolf

effects are still not over... you cant compare one urban area to full China.

LexFather

The business model is really tough for Japan
-anti Japanese sentiment
-if you don't build there, your imports are taxed highly
-if you don't have some small engines, you won't succeed
-things like LWB mid-size cars sell, Lexus offers nothing there (until the LWB ES comes)
-German cars are simply seen as more desirable

Overall Lexus cannot take the one-size fits all approach that didn't work in Europe to China. The tension between the countries does not help either.

spwolf

I dont think Buick competes with Lexus in China at all.

Lexus wants to build up sales until they require local factory... only then they can expand, as high tariffs make Lexus very expensive import in China.... CT200h is 2x more expensive than similar Buick.

Brian@Vossen

The Germans dominate there...we saw first hand

GS69

Lexus Made in Japan Risks China Irrelevance

When shopping last year for his first car, Will Zhang considered a Lexus CT200h and a BMW 320i. Though he preferred the Lexus, he went with the BMW because at 340,000 yuan ($55,400) it was 18 percent cheaper.

“The Lexus has superior quality, performance and fuel economy,” said the 32-year-old manager at a Shanghai property developer. “But I chose the BMW for the price.”

While the Lexus lists for about $600 less than the BMW in the U.S., in China it’s $13,000 more because the German automaker produces its cars in the country, whereas made-in-Japan Lexus faces a 25 percent tariff.

Toyota Motor Corp. (7203)’s luxury brand has “squandered its time” in China, said Zhu Bin, an analyst at researcher LMC Automotive in Shanghai. “They have been too conservative in increasing investment.”

Lexus last year delivered 60,636 vehicles in China, versus 407,738 for Volkswagen AG (VOW3)’s Audi, the bestselling premium brand in the country, and 313,638 for Bayerische Motoren Werke AG (BMW)’s BMW, according to LMC. Daimler AG (DAI)’s Mercedes-Benz was 3rd with 207,099, LMC reports.

The 3 German luxury automakers, which all build cars in China, have quadrupled their local production in the last 5 years and now account for about 75 percent of the premium cars sold in the world’s biggest auto market, LMC data show.

While Lexus 2012 China sales rose 16 percent -- ranking it 4th in the premium category -- it will soon face more competition. General Motors Co. (GM) started building a new Cadillac factory in Shanghai this year, and Volvo, Land Rover, Infiniti, and Acura all plan to begin manufacturing in China by 2016, the year consultant McKinsey & Co. says the country will overtake the U.S. as the top market for luxury vehicles. Toyota, by contrast, has announced no plans to produce Lexus in China, even though it has 5 factories making cars for the Toyota nameplate.

‘Already Late’

“It’s already late” for Lexus, said Lin Huaibin, an analyst at IHS Automotive in Shanghai. “They can’t afford to continue ignoring China as that’s where most of the growth in the premium market will come from.”

When deciding whether to manufacture in a country, Toyota considers demand and the level of technology and performance of its factories, according to Shino Yamada, a spokeswoman for the company in Tokyo. Hiroji Onishi, Toyota’s China head, said in April that he has proposed producing Lexus in the country but that the timing and details haven’t been decided.

Infiniti Brand

Toyota’s approach contrasts with that of Nissan Motor Co. Though Infiniti sells only about a 5th as many cars as Lexus in China, Nissan Chief Executive Officer Carlos Ghosn is planning to produce the premium nameplate’s models there as part of a global expansion. Ghosn hired Johan de Nysschen from Audi to lead a revamp and moved the brand’s headquarters from Yokohama, Japan, to Hong Kong to be closer to mainland China.

Infiniti will manufacture 2 long-wheelbase models at Nissan’s Xiangyang plant in the central province of Hubei next year to cater to Chinese buyers’ taste for larger cars.

“China is top priority for us,” de Nysschen, Infinit’s president, said in an interview in April. “We have decided to take a far bolder approach and announced manufacturing well before we actually have developed the brand to critical mass.”

Honda Motor Co. (7267), whose upscale Acura brand sold fewer than 3,000 units in China last year, unveiled a concept sport utility vehicle at the Shanghai auto show in April. The Tokyo-based automaker plans to produce the SUV in China in 3 years, President Takanobu Ito said.

Toyota Shares

Investors have shrugged off the Lexus China shortfall, pushing Toyota’s shares up 42 percent this year. That compares with gains of 21 percent for Nissan and 11 percent at Honda as Japanese automakers have benefited from a weaker yen that boosts export earnings. Volkswagen and BMW have declined 12 percent and about 10 percent respectively, and Daimler is up 10 percent.

Like Infiniti and Acura, Lexus faces the added burden of its nationality in China. Sales of Japanese cars there slumped last year after a dispute between the 2 countries over islands in the East China Sea triggered a consumer backlash.

The flare-up in tensions probably delayed Toyota’s decision to localize Lexus production, said Koichi Sugimoto, an auto analyst at BNP Paribas in Tokyo. Lexus’s strong brand recognition and sales in the U.S. also means there’s less urgency to build cars in China, he said.

Toyota may start producing Lexus cars in China in 2015 or 2016, when annual sales will likely reach about 100,000 units, according to Kota Yuzawa, an auto analyst with Goldman Sachs Group Inc. in Tokyo. A single model typically needs to sell 30,000 to 40,000 units a year for local production to make economic sense, he said.

“Toyota still has a lot to do before localization, such as introducing models targeting young luxury buyers, or bigger cars with smaller engines,” Yuzawa said. “They have a lot of things they can do to increase sales.”

To contact the reporters on this story: Ma Jie in Tokyo at jma124@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

mmarshall

It does in the Chinese mind, despite some of the price differences. Buick, in China, also offers some more expensive and upmarket models (more in line with upmarket Lexus products) than it does here at home. The Chinese have long-considered Buick a luxury/prestige nameplate, despite the fact that here in America, the brand is often (unfairly) tagged as Geezer-mobiles.

The Buick Excelle (Verano in the U.S.) is currently China's top-selling single vehicle. 2K price-difference or not, it will be very hard for the the CT to compete with the Excelle. It would be like expecting Mitsubishi's Galant to try and knock Toyota's Camry out of first-place sales, here in America, among family-sedans. Just isn't going to happen.

spwolf

Here is best selling Buick Excelle in China:



it is 2x price difference, Excelle is Corolla like car and Buick is Toyota like brand in China. Doesnt have anything to do with Lexus.

1sWt2GS

iTrader: (6)

Asian people love Lexus over here in the States.