On July 23rd, it was reported that Lexus will produce two new energy vehicle models first under the premise of building a factory independently in china. In response to the above news, Toyota China and Lexus China both responded to reporters that they "have no comment on the rumor." An insider told the reporter that (in Shanghai) there has indeed been contact with Toyota, but there are still many uncertain factors whether the plan of Lexus's solely-owned factory can be implemented or not.
Despite the rumors that it is domestically produced and the official statement that there is no domestic production plan, the news of Lexus settling in Shanghai is once again spreading.
On July 23, it was reported that under the premise of building an independent plant in China, Lexus will first produce a new UX hybrid version and a brand-new pure electric vehicle, which will be sold in China and other overseas markets such as Japan at the same time. Responding to the news, Toyota China and Lexus China both responded to the reporters by saying "The rumor is not commented."
"(Shanghai side) has indeed had contact with Toyota, but there are still many uncertain factors about whether Lexus’ plan to build a wholly-owned factory can be landed." An informed person told reporters, "Of course, if Lexus builds a wholly-owned factory in China, it will produce pure electric models rather than hybrid products."
The increasing threshold for domestic production
The news that Lexus is again being domesticated originated from a report by foreign media nearly a month ago.
On June 29, it was reported that Toyota was seeking treatment similar to Tesla, including tax reductions and exemptions, policy support, land grants, and the condition that it can operate directly without a local joint venture partner. This factory will produce electric vehicles for its Lexus brand.
"The Shanghai Municipal Government is willing to attract more foreign investment, but it may require higher-level approval, which means that negotiations between the two sides are far from complete and may even change." The report cited informed sources as saying. At that time, Toyota China did not respond positively to this news, only saying "no comment on rumors."
Over the 20 years of entering the Chinese market, Lexus has repeatedly acted out the story of "The Boy Who Cried Wolf" about domestic production. In 2006, Lexus stated that if China's sales volume exceeded 0.03 million units, it would consider domestic production. By 2007, Guangzhou Toyota's senior management in China released the wind that "if Lexus' annual sales volume reaches 0.05 million units, we will consider domestic production." By 2012, Lexus once again raised the threshold for domestic production to 0.1 million units.
Around 2012 was the stage of the prosperous luxury car market in China. In 2013, Nissan's Infiniti and Honda's Acura successively determined joint-venture domestic production matters. Daijiro Hiromi, the former general manager of Toyota China, revealed at the Shanghai Auto Show that year that the localization of Lexus production in China was under discussion and is expected to start with the production of the ES mid-size luxury sedan. This is also the first time that Toyota has released the news of Lexus' domestic production.
In 2016, when sales in China exceeded 0.1 million units, Lexus once again said that there was no plan for domestic production. In October 2018, citing insiders' news from Toyota, some media reported that in order to compete with BBA, Toyota executives are eager to increase Lexus sales and promote Lexus' domestic production project in China. Toyota has confirmed the specific plan for Lexus's domestic production in China. However, Lexus once again denied that there is no specific time for localization.
"Lexus has indeed been discussing related matters about building a factory and production in China for years, but it is not easy." The above-mentioned sources said that in the face of Lexus' domestic production, Toyota is very entangled, "They (Toyota executives) always think that the timing and all aspects of the conditions are not very mature."
Domestic production still needs a "North-South balance trick"
In 2018, Tesla, which announced the establishment of a joint venture company in China and invested in a super factory in Shanghai, seemed to have opened a window for Lexus' domestic production.
According to the latest industrial policy, foreign brands setting up new energy companies in China will no longer be subject to equity ratio restrictions. This means that there are no policy obstacles to Lexus' wholly-owned factory in China. But industrial policy is not all that Lexus considers in the domestic production of China.
"Toyota executives' hesitation points also include how to deal with the relationship with the current two domestic joint ventures (FAW Toyota and Guangzhou Toyota)-does the Chinese side need to give an account? Will the model launch, supply chain and sales model be reshaped? Balancing these (problems) will be a long process." The above-mentioned informed sources analyzed. In addition, the high-end image of Lexus' imported brands among consumers has begun to weaken. Even if it follows Tesla to achieve domestic production, it is still unknown whether Lexus can get the market performance like Tesla, "The landing of a wholly-owned factory may have a limited stimulating effect on Lexus' sales."
As a luxury brand under Toyota, Lexus was once a profit "printing press" for Toyota in China, but now it has changed with the advent of electrification. Official data shows that as early as 2019, Lexus' cumulative sales in China exceeded 0.2 million units, with a year-on-year growth rate of up to 25%. In 2023, Lexus' sales volume in China will be about 0.1814 million units, with a year-on-year growth rate of only 3%. In contrast, other global markets outside China of Lexus all enjoyed growth of more than 20% in 2023. Among them, the year-on-year growth rates in the Middle East, Japan, and East Asia exceeded 60%, reaching even up to 130%.
Toyota's president, Sato Tsuneharu, has stated that China will play a very important role in the electrification of Lexus. According to the plan, Lexus will achieve 100% electrification by 2035. In Toyota's latest plan, the next generation BEV (pure electric vehicle) products developed by the BEV Factory will be launched on the market by Lexus in 2026.
"The production of Lexus electric vehicles in China would definitely be more advantageous than in Japan." In the opinion of the Secretary-General Cui Dongshu of the China Passenger Car Association, the Chinese market is the world's largest market for new energy vehicles. Seeking to build new energy factories in China can enhance its competitiveness, offset the pressure of electrification transformation in other global markets, and continue to maintain its advantages in the global market. "For the Lexus brand, if local production is successful, it can bring more consumer confidence, further enhance competitiveness, and promote industrial integration."