Toyota, sensing an opening, debates building Lexus cars in China
10-08-18, 02:12 PM
#1
Lexus Fanatic
Thread Starter
Toyota, sensing an opening, debates building Lexus cars in China
Toyota, sensing an opening, debates building Lexus cars in China
http://www.asahi.com/ajw/articles/AJ201810060038.html
BEIJING--Toyota Motor Corp., long opposed to producing its premium Lexus cars in China because of concerns over quality and profitability, is now considering it to ignite growth and narrow sales gaps with its German rivals, four company insiders told Reuters.
The company, which imports Lexus models made in Japan to sell in China, has spent the last two years researching how to produce them locally.
Toyota also talked to its Chinese joint-venture partners--Guangzhou Automobile Group Co. and FAW Group--last year about Lexus models. It wasn't clear whether Toyota approached the Chinese companies about a partnership or vice versa.
Local production would be a major shift for the world's largest automaker, encouraged by improved China-Japan ties, as well as new Chinese investment rules that might allow foreign automakers to fully own or majority-control China operations.
"We're torn over this," said one of the insiders.
"But it makes little sense to let this opportunity slip by," another told Reuters.
All four insiders declined to be identified because they are not authorized to speak to the media.
China's planned scrapping of foreign ownership restrictions in the auto industry is in part a response to criticism that Chinese companies have been largely allowed to invest freely in outside markets while Beijing limits foreign firms' access to the world's second-largest economy.
The rule changes--affecting electric carmakers this year and others by 2022--led Tesla Inc. to gain Beijing's approval for a wholly-owned China manufacturing and sales company in Shanghai. That marked the first time a foreign carmaker established itself in China without a partner.
Toyota already produces numerous Toyota-brand models, including the Camry, Highlander, Corolla, Levin and Crown, in China with partners. Last year it sold 1.29 million cars there, including imported Lexuses.
Toyota had contemplated moving Lexus production to China before --as far back as 2011-12, according to one of the four insiders.
But it had until now considered a potential erosion of quality too much of a risk, and didn't want to sacrifice the brand's relatively high margins by sharing profits with a local partner.
Two of the Toyota insiders said the automaker had identified specific scenarios for localizing Lexus.
"All the preparation has been more or less completed," one said. "All we're waiting is a 'go' from management."
TRICKY TIMING
Toyota's preferred option is to own all or most of a localized Lexus unit, which it could do immediately by building only electric cars. (Lexus has plans for electric battery and plug-in electric hybrid versions of existing models.)
But China might not let another brand in when the market has slowed down significantly, with sales of some foreign vehicles, including Groupe PSA, Ford and Hyundai, all falling in the gutter in recent months.
"You'd still need a good political follow-wind to execute this," one of the sources said, pointing to help from Japanese Prime Minister Shinzo Abe, who has a state visit to China planned for this month.
Even as other premium brands--such as Audi, BMW, Mercedes-Benz and Cadillac--have opened assembly plants in China to gain market share, Toyota has resisted.
That reluctance reflects the company's unwillingness to share with a Chinese partner a brand painstakingly built since 1989 into a top premium car in the United States.
Opponents inside Toyota also point to China's lowering tariffs on passenger cars to 15 percent from 25 percent in July as a reason to keep importing Lexuses.
They also note that the nearest Lexus plant to China is at the northern tip of Japan's southernmost main island of Kyushu--only two days from Shanghai by sea.
A Toyota spokesman in Tokyo said "the most important task" for Lexus is to become a distinguished brand in China.
"We always weigh the need for localizing production as part of the consideration for the Lexus brand's future in China," he said. "But at this point in time, we don't have any specific plans for producing Lexus cars in China."
Nonetheless, support for localization is growing among Toyota leaders.
China has typically been a difficult market for Japanese companies, but there is new optimism, especially after an official visit to Japan by Chinese Premier Li Keqiang in May.
During his visit, Li toured Toyota facilities on the northern island of Hokkaido, escorted by the company's family scion and chief executive, Akio Toyoda.
Toyoda has since sought to boost his company's presence in China, including an effort to significantly expand its manufacturing capacity and distribution networks, and share more technologies with Chinese companies.
NEED FOR SPEED
China has also proposed limiting new production capacity for automakers, adding an incentive for Toyota to move quickly if it wants to build Lexus models there.
Nissan Motor Co. and Toyota have each recently revealed plans to boost capacity, much of which will be used to produce electric cars.
Alan Kang, a Shanghai-based analyst for consultancy LMC Automotive, thinks localizing production is exactly what Lexus needs to start narrowing the big sales gap with German premium brands.
Mercedes-Benz, for example, last year sold about 610,000 vehicles, compared to 130,000 for Lexus during the same year, according to LMC.
"If Lexus doesn't want to remain a niche, it needs to start investing more," Kang said.
http://www.asahi.com/ajw/articles/AJ201810060038.html
BEIJING--Toyota Motor Corp., long opposed to producing its premium Lexus cars in China because of concerns over quality and profitability, is now considering it to ignite growth and narrow sales gaps with its German rivals, four company insiders told Reuters.
The company, which imports Lexus models made in Japan to sell in China, has spent the last two years researching how to produce them locally.
Toyota also talked to its Chinese joint-venture partners--Guangzhou Automobile Group Co. and FAW Group--last year about Lexus models. It wasn't clear whether Toyota approached the Chinese companies about a partnership or vice versa.
Local production would be a major shift for the world's largest automaker, encouraged by improved China-Japan ties, as well as new Chinese investment rules that might allow foreign automakers to fully own or majority-control China operations.
"We're torn over this," said one of the insiders.
"But it makes little sense to let this opportunity slip by," another told Reuters.
All four insiders declined to be identified because they are not authorized to speak to the media.
China's planned scrapping of foreign ownership restrictions in the auto industry is in part a response to criticism that Chinese companies have been largely allowed to invest freely in outside markets while Beijing limits foreign firms' access to the world's second-largest economy.
The rule changes--affecting electric carmakers this year and others by 2022--led Tesla Inc. to gain Beijing's approval for a wholly-owned China manufacturing and sales company in Shanghai. That marked the first time a foreign carmaker established itself in China without a partner.
Toyota already produces numerous Toyota-brand models, including the Camry, Highlander, Corolla, Levin and Crown, in China with partners. Last year it sold 1.29 million cars there, including imported Lexuses.
Toyota had contemplated moving Lexus production to China before --as far back as 2011-12, according to one of the four insiders.
But it had until now considered a potential erosion of quality too much of a risk, and didn't want to sacrifice the brand's relatively high margins by sharing profits with a local partner.
Two of the Toyota insiders said the automaker had identified specific scenarios for localizing Lexus.
"All the preparation has been more or less completed," one said. "All we're waiting is a 'go' from management."
TRICKY TIMING
Toyota's preferred option is to own all or most of a localized Lexus unit, which it could do immediately by building only electric cars. (Lexus has plans for electric battery and plug-in electric hybrid versions of existing models.)
But China might not let another brand in when the market has slowed down significantly, with sales of some foreign vehicles, including Groupe PSA, Ford and Hyundai, all falling in the gutter in recent months.
"You'd still need a good political follow-wind to execute this," one of the sources said, pointing to help from Japanese Prime Minister Shinzo Abe, who has a state visit to China planned for this month.
Even as other premium brands--such as Audi, BMW, Mercedes-Benz and Cadillac--have opened assembly plants in China to gain market share, Toyota has resisted.
That reluctance reflects the company's unwillingness to share with a Chinese partner a brand painstakingly built since 1989 into a top premium car in the United States.
Opponents inside Toyota also point to China's lowering tariffs on passenger cars to 15 percent from 25 percent in July as a reason to keep importing Lexuses.
They also note that the nearest Lexus plant to China is at the northern tip of Japan's southernmost main island of Kyushu--only two days from Shanghai by sea.
A Toyota spokesman in Tokyo said "the most important task" for Lexus is to become a distinguished brand in China.
"We always weigh the need for localizing production as part of the consideration for the Lexus brand's future in China," he said. "But at this point in time, we don't have any specific plans for producing Lexus cars in China."
Nonetheless, support for localization is growing among Toyota leaders.
China has typically been a difficult market for Japanese companies, but there is new optimism, especially after an official visit to Japan by Chinese Premier Li Keqiang in May.
During his visit, Li toured Toyota facilities on the northern island of Hokkaido, escorted by the company's family scion and chief executive, Akio Toyoda.
Toyoda has since sought to boost his company's presence in China, including an effort to significantly expand its manufacturing capacity and distribution networks, and share more technologies with Chinese companies.
NEED FOR SPEED
China has also proposed limiting new production capacity for automakers, adding an incentive for Toyota to move quickly if it wants to build Lexus models there.
Nissan Motor Co. and Toyota have each recently revealed plans to boost capacity, much of which will be used to produce electric cars.
Alan Kang, a Shanghai-based analyst for consultancy LMC Automotive, thinks localizing production is exactly what Lexus needs to start narrowing the big sales gap with German premium brands.
Mercedes-Benz, for example, last year sold about 610,000 vehicles, compared to 130,000 for Lexus during the same year, according to LMC.
"If Lexus doesn't want to remain a niche, it needs to start investing more," Kang said.
10-08-18, 08:24 PM
#2
Lexus Fanatic
All four insiders declined to be identified because they are not authorized to speak to the media
Toyota Motor Corp., long opposed to producing its premium Lexus cars in China because of concerns over quality
Toyota had contemplated moving Lexus production to China before --as far back as 2011-12, according to one of the four insiders.
But it had until now considered a potential erosion of quality too much of a risk,
But it had until now considered a potential erosion of quality too much of a risk,
Last edited by mmarshall; 10-08-18 at 08:55 PM.
10-08-18, 08:46 PM
#3
Lexus Fanatic
Thread Starter
I think the quality concern is overblown. I've looked at, test-driven, and reviewed the Buick Envision, which is currently the only mass-produced vehicle built in China that is sold in the U.S., and the Envision appears to be built as solidly and carefully as anything I've seen from vehicles built in any other country....even Japan and Korea.
10-09-18, 01:16 AM
#4
I heard in the news that we are supposed to avoid manufacturing in China due to the need for a foreign company to "partner" with a local Chinese company - so that the latter can be cleverly given free access to foreign intelligence and technology - that is, free access to technology blueprints without the need to pay an US employee millions of dollars for the blueprints of the atomic bomb, and without the need to hack US computers to obtain blueprints for the F-35 stealth jet etc?
Is this correct?
Is this correct?
10-09-18, 07:12 AM
#5
Lexus Fanatic
iTrader: (20)
wait until they export chinese lexus' back to the u.s. and japan. 
10-09-18, 08:47 AM
#6
Lexus Champion
I heard in the news that we are supposed to avoid manufacturing in China due to the need for a foreign company to "partner" with a local Chinese company - so that the latter can be cleverly given free access to foreign intelligence and technology - that is, free access to technology blueprints without the need to pay an US employee millions of dollars for the blueprints of the atomic bomb, and without the need to hack US computers to obtain blueprints for the F-35 stealth jet etc?
Is this correct?
Is this correct?
But China is now planning to allow wholly foreign-owned automakers by 2022. That would allow Toyota to build Lexus models in China in their own factories and not have to worry about Chinese automaker-built cars.
China plans to lift all limits on foreign ownership of auto makers by 2022.
China will remove limits on foreign ownership of auto manufacturers by 2022, ending restrictions that had strained relations with its trading partners, particularly the U.S.
The National Development and Reform Commission announced in a statement on Tuesday that China will scrap foreign ownership limits on new energy vehicle manufacturers in 2018, followed by commercial vehicle makers in 2020 and passenger vehicle companies in 2022.
In China, which is the world's largest auto market, foreign carmakers are currently allowed to own up to a 50% share of any local venture. The rule is aimed at protecting domestic carmakers from international competition while prompting foreign auto makers to share their technologies.
China will remove limits on foreign ownership of auto manufacturers by 2022, ending restrictions that had strained relations with its trading partners, particularly the U.S.
The National Development and Reform Commission announced in a statement on Tuesday that China will scrap foreign ownership limits on new energy vehicle manufacturers in 2018, followed by commercial vehicle makers in 2020 and passenger vehicle companies in 2022.
In China, which is the world's largest auto market, foreign carmakers are currently allowed to own up to a 50% share of any local venture. The rule is aimed at protecting domestic carmakers from international competition while prompting foreign auto makers to share their technologies.
Chinese-built Lexus models will likely stay in China or be limited for sale in the quickly-growing East-Asian countries (Vietnam, Thailand, Malaysia, Singapore).
Audi and Mercedes-Benz, for example, do not export Chinese-built models to North America.
10-09-18, 09:35 AM
#7
Don't forget about the proposed Trump tariffs on Chinese imports. Buick has requested an exception for the Envision. Haven't heard how that's going.
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10-09-18, 11:41 AM
#9
Lexus Test Driver
I think the quality concern is overblown. I've looked at, test-driven, and reviewed the Buick Envision, which is currently the only mass-produced vehicle built in China that is sold in the U.S., and the Envision appears to be built as solidly and carefully as anything I've seen from vehicles built in any other country....even Japan and Korea.
but i agree i'm sure quality won't suddenly drop off, it's mainly the principle i don't like. just don't build the LS in china and i'll be able to sleep just as soundly.
10-09-18, 11:59 AM
#10
Lexus Fanatic
Now, Now. I have plenty to say if and when there are things on them I don't like or I think could be improved. Not only that, but IMO the Lacrosse is the only REAL Buick still in production....and the Enclave, to a lesser extent. The others are all rebadged Opels, though the non-discontinued Verano, for a compact, had several good Buick-like attributes.
10-09-18, 12:19 PM
#11
Driver School Candidate
Chinese built Lexus - Would you buy?
https://japantoday.com/category/busi...-cars-in-China
Would you buy a Lexus built in China?
I wouldn't pay the premium Lexus charges for a car built outside Japan. I consider RX and ES to be only marginally true Lexus.
Would you buy a Lexus built in China?
I wouldn't pay the premium Lexus charges for a car built outside Japan. I consider RX and ES to be only marginally true Lexus.
10-09-18, 12:26 PM
#12
Lexus Fanatic
Thread Starter
https://japantoday.com/category/busi...-cars-in-China
Would you buy a Lexus built in China?
I wouldn't pay the premium Lexus charges for a car built outside Japan. I consider RX and ES to be only marginally true Lexus.
Would you buy a Lexus built in China?
I wouldn't pay the premium Lexus charges for a car built outside Japan. I consider RX and ES to be only marginally true Lexus.
10-09-18, 12:31 PM
#13
Lexus Champion
It wouldn't bother me if they built the Lexus cars for China in China. Just like I have no issue with them building them in NA for the NA market.
10-09-18, 01:29 PM
#14
drives cars
Though to be honest, from a build-quality perspective, I don't see a tangible difference between American- and Japan-built Lexus models thus far. On the other hand, I have only driven the US-build exmaples occasionally.
10-09-18, 03:07 PM
#15
Lexus Fanatic
The "Made in Japan" issue was once (1950s) a stigma, then became a well-deserved asset (1970s-2000s), and now, lately, for the most part, really isn't that much different from products we see from the rest of the world. It's not so much that Japanese goods have dropped in quality so much as the rest of the world has caught up, particularly the Koreans.