In this round of competition to determine the future, Lexus has already lost the first-mover advantage.

Rumors about the localization of Lexus have not been heard since the wave of localization of luxury brands emerged a decade ago. However, over the past decade, whenever there were rumors of localization, Lexus always exhibited a reluctance and responded with a unified format - false reports.

On June 29, 2024, according to Bloomberg, Toyota is seeking to establish a Lexus plant in Shanghai on a wholly-owned basis, with the positioning of producing high-end electric vehicles. The report stated that Toyota is seeking similar treatment to Tesla, including tax incentives, policy support, land grants, and the condition of direct operation without a local joint venture partner. The plant will produce electric vehicles for the Lexus brand.

This time, Toyota's response was, "No comment on rumors." Compared to previous outright denials, Toyota's attitude is much more ambiguous at this time.

Behind this contrast lies the difference in subjects and objects in the spread of "rumors." In the past, everyone outside of Toyota wanted Lexus to be localized, but now it's almost the opposite, as Toyota has its own plans.

Decade-long Entanglement

As early as 2011, there were media reports that Lexus would be localized in China, but most were rejected by Toyota.

On April 21, 2013, during a media interview at the Shanghai Auto Show, Hiroyuki Onishi, then general manager of Toyota China, expressed Toyota's intention to produce Lexus in China. This was also the first time that Toyota had released news about localization.

At that time, Infiniti under Nissan and Acura under Honda, the two major Japanese luxury brands, had already established joint ventures for localization, one with Dongfeng and the other with GAC. Lexus under Toyota gradually entered the public eye, and the outside world couldn't help but imagine that Lexus should also join the wave of localization, and FAW became a popular choice at the time.

However, after continuous weighing of options, the localization plan ten years ago was also shelved.

Within Toyota, there have always been two voices regarding the localization of Lexus. Radicals advocated following the steps of global luxury brands and accelerating the expansion into the Chinese market, while conservatives believed that it only takes two days from the Kyushu plant to the Shanghai port, so there is no need to increase costs by localizing, and profits would need to be shared with Chinese companies in a joint venture, which would be a losing proposition.

At the end of 2017, the "New First Production Line Project" of Tianjin FAW Toyota was preparing to introduce Toyota's new global TNGA architecture, which could achieve shared parts with Lexus models and even potentially co-production. This news was also seen as laying the foundation for the localization of Lexus, but Toyota soon denied this rumor.

Amid repeated debunking of rumors, Lexus has become a famous meme in the Chinese automotive consumer market, almost going through the public opinion field every year.

In October 2018, Reuters cited four Toyota insiders as saying that Lexus has not been localized in China for a long time due to concerns about production quality and reluctance to share profits with partners. However, in order to compete with BBA in the Chinese market, Toyota's senior management was eager to increase Lexus sales and advocated promoting the localization project of Lexus in China.

At that time, Audi, Mercedes-Benz, and BMW had firmly occupied the top three positions among luxury brands, and the localized Cadillac was also soaring, even forming a market pattern of BBA+C for a time. Lexus, as the only representative of second-tier luxury brands, seemed somewhat impatient.

More importantly, in 2018, under the stimulus of the policy of liberalizing joint venture shareholding ratios, Toyota's attitude towards the localization of Lexus underwent a significant change.

Just two months later, an official tweet from FAW Group revealed FAW Toyota's future plans, mentioning that the third step of FAW Toyota's development plan was to "officially introduce the Lexus luxury brand." This once again sparked widespread speculation about the imminent localization of Lexus.

The responses from Lexus and Toyota China have begun to change from "false reports" to "no definite plans for localization." The implication is that there are plans, but they are not yet clear, so neither right nor wrong can be said. The responses also reveal a Japanese-style rigor.

It is worth noting that although BBA and Cadillac are surging ahead, among localized luxury brands, the development of Infiniti and Acura has been unsatisfactory, while Lexus, with an average annual growth rate of 15%, has already reached the high platform of annual sales of 100,000 vehicles.

Whether there is a need for localization has also become a topic that Toyota constantly asks itself.

Localization Cannot Save Lexus

In 2020, when Lexus fully launched its global new plant plan, the outside world was speculating whether Lexus's new plant would land in China. However, the answer surprised everyone. Lexus chose India, which only sold 550 vehicles annually, as the location for its new global plant.

Before that, Lexus had three factories in Japan that had been qualified as its production bases, including the Motomachi Plant (a complex plant that co-produces Toyota and Lexus GS, GS HYBRID, GS F) in Toyota City, Aichi Prefecture, Japan; the Tahara Plant (LS, LS HYBRID, IS, GX, LX, RC, RC F) in Tahara, Aichi Prefecture, Japan; and the Kyushu Plant (ES, ES HYBRID, IS, RX, CT HYBRID, NX, NX HYBRID).

Among them, the Kyushu Plant once accounted for half of Lexus's global sales and 90% of its production tasks for sales to China. In North America, Lexus also has the Lexington Plant in Kentucky, USA, with a capacity of 50,000 units (ES), and the Cambridge Plant in Ontario, Canada, with a capacity of 104,000 units (RX, RX HYBRID).

Bangalore, India, has become the third important production base chosen by Lexus outside of Japan and the United States. Some analysts believe that the reason for Lexus's Indian plant is the heavy tariffs in India, while China's tariffs were reduced from 25% to 15% in 2018. There are also claims that the plant has some political undertones behind it. In any case, the Chinese market, which has not yet built a plant, has become the place with the highest global profits for Lexus.

Regardless of how Toyota previously viewed the localization of Lexus, at this moment, in their eyes, it is finally time for Lexus to be localized.

In 2023, Lexus sold 824,258 vehicles globally, representing a year-on-year increase of 32%. The Chinese market followed closely behind, with sales reaching 181,411 units, representing a year-on-year increase of 3%. From January to May this year, Lexus accumulated sales of 69,000 units, representing a year-on-year increase of 28%. Although sales seem stable, they are achieved at the expense of profits.

Taking the Lexus ES, the main model, as an example, in previous years, it was basically necessary to pay an additional 10,000 to 20,000 yuan to pick up the car, but many places are now offering significant discounts. In some regions, the discount even reaches 90,000 yuan, and the once-valuable car is gradually descending from the throne.

Li Hui, executive deputy general manager of Lexus China, previously revealed that Lexus's sales target for 2024 is 180,000 units. Currently, Lexus has completed 40% of its target sales, and the overall progress is still quite impressive. However, there are still many variables regarding whether Lexus can achieve its sales target this year, as the current sales are basically maintained through significant discounts.

In terms of new energy, Lexus China currently only has the RZ pure electric vehicle and the RX 450h+ and NX 400h+ plug-in hybrid models in its lineup. Of course, these models hardly have any presence in the Chinese market.

When searching for the keyword "Lexus New Energy," without exception, all the information is about discounted sales promotions.

The most important part of this localization news is the production of high-end electric vehicles in China. Clearly, Toyota is well aware that it cannot escape the global electric vehicle wave without relying on the Chinese supply chain. Tesla's rapid development in China and Apple's abandonment of car manufacturing are the best examples.

If Lexus successfully establishes a wholly-owned plant in Shanghai, a series of mature supporting enterprises in Tesla's Lingang Industrial Zone will become readily available resources.

At this year's Tokyo Motor Show, Lexus announced that it will embark on a transformation phase of entering the era of electrification in 2026 and released the Lexus LF-ZC (Lexus Future Zero-emission Catalyst) concept car. It is reported that the car will adopt a modular architecture, and significant changes will be made to its production methods. At the same time, the software platform will also be completely redesigned.

Undoubtedly, Lexus still wants to exert its strength in the direction of electrification. Against this backdrop, the construction of a Chinese plant is undoubtedly laying the foundation for its global strategy.

However, in this round of competition to determine the future, Lexus has already lost the first-mover advantage.

Note: Some images are sourced from the internet. If there is any infringement, please contact us for removal.