Lexus Sales Booming in China

Posted by Kevin on August 22nd, 2017

Lexus sales in China are up 27% year-over-year, with January-to-July 2017 sales totaling 71,564 units — from China Daily:

In the first seven months of the year, sales of the Lexus ES mid-sized sedan reached 31,947 vehicles in China, beating the US as the model’s largest single market. Meanwhile, Lexus sold 17,023 of its RX mid-sized SUV and 14,701 of its NX compact SUV. Ezumi said Lexus will launch a NX facelift and a CT facelift compact car during the Chengdu motor show later this month.

Lexus sold 109,000 vehicles last year in China, it’s second-biggest single market in the world after the United States — if growth remains the same for the rest of 2017, Lexus China could hit 140,000 units.

One surprising detail to come out of the sales update is the average age of Chinese Lexus owners:

Ezumi said Lexus’ strategic shift from “a conventional luxury brand to an emotional one with amazing lifestyle experiences” will also help it to boost sales in China where luxury car buyers are much younger than in other major markets in the world.

Lexus car owners in China are on average 35 years old, at least 25 years younger than in the US and Japan, according to Ezumi.

He said the brand shift is expected to woo more young customers who have increasingly diversified demands.

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Comments
S
With 140k sales per year, China is #2 market for Lexus, easily 2x the Japanese market.

I wonder how will this influence future Lexus products? EV sooner than planned? More turbo engines? Factory for new TNGA based platform (ES, NX, RX, UX, etc).
krew
spwolf
I wonder how will this influence future Lexus products? EV sooner than planned? More turbo engines? Factory for new TNGA based platform (ES, NX, RX, UX, etc).
I think we're already seeing China's influence with the rumored repositioning of the ES as the "official" Lexus mid-size sedan. Also, I don't think Lexus can hold out much longer on a China factory, especially if it's true that a India plant is being considered.
LDeleuran
To put this into perspective. Audi sold 591,554*units in China in 2016 (Out of 3.006.215 for VAG as a whole in China)

BMW: 310.000 units.

MB: 326.690 units.

Buick sold 1.229.804 mostly rebadged and long wheel base Opels.


*536.289 according to a secondary source


All that said and done, Lexus is doing incredibly well when considering the Chinese/Japanese relations in some provinses of China.
Gecko
I wonder if the booming Chinese market bodes well for the GS? The Chinese are known to like LWB versions of their entry level and midsize sedans vs. all out flagships, so we've seen Mercedes, BMW and Audi offer LWB versions of the E, 5 and A6 there.

I'm not sure how much more Lexus can stretch out the TNGA FWD architecture to be a fit in this space if they're going to make the new ES Avalon-sized to begin with. Something RWD on GA-L, that has easier scalability past being midsize might be easier. GS might give them the leverage between ES and LS in a market that's lighter on flagships.

RX L will probably be a big hit in that market.
S
LDeleuran
To put this into perspective. Audi sold 591,554*units in China in 2016 (Out of 3.006.215 for VAG as a whole in China)

BMW: 310.000 units.

MB: 326.690 units.

Buick sold 1.229.804 mostly rebadged and long wheel base Opels.


*536.289 according to a secondary source


All that said and done, Lexus is doing incredibly well when considering the Chinese/Japanese relations in some provinses of China.
If only Lexus had 1:3 ratio worldwide vs BMW/MB, it would mean that Lexus sales would be over 1 million.

If they actually end up building a factory there, it would likely double their sales in few years period... right now they are charged high import tax on all of their models (i think 25% is the import tariff).

I dont think anti-japanese sentiment is really a factor, outside of major issues that get a lot of media time... like right now Hyundai sales are collapsing due to issues between Koreas and China. But Japanese brands are growing above market rates.
S
spwolf
If only Lexus had 1:3 ratio worldwide vs BMW/MB, it would mean that Lexus sales would be over 1 million.

If they actually end up building a factory there, it would likely double their sales in few years period... right now they are charged high import tax on all of their models (i think 25% is the import tariff).

I dont think anti-japanese sentiment is really a factor, outside of major issues that get a lot of media time... like right now Hyundai sales are collapsing due to issues between Koreas and China. But Japanese brands are growing above market rates.
actually, sales of German brands are much higher... these are only sales for locally produced models of Audi/BMW/MB, without imports.
In January 2017 alone, BMW group sold over 50k vehicles in China, around 30% of their Global sales:
http://www.chinadaily.com.cn/business/motoring/2017-02/11/content_28169419.htm

So for BMW, China is #1 market and 2x the sales of US market. I think it can already been seen in some of their designs and decisions, for instance overuse of chrome, something that Asians love, on new 7 series, and as well as direction of how their vehicles are setup - as luxury vehicles, not sport sedans.
S
Despite the great growth Lexus is still tiny compared to the German Big Three. With undersized engines and domestic production (both result in reduced taxes) the Big Three are able to significantly undercut Lexus in price, which used to be Lexus' biggest advantage over them. From what I've seen in China (and feedback from dealerships), Lexus is on retreat with almost every model being unable to compete head to head against European marques. Lexus needs to reduce its prices by undersizing the engines, and they are already equipping almost every model with the 8AR. The local production part is a little bit on the uncertain side, because Lexus is unlikely to compromise reliability and quality over price. The Big Three definitely sacrificed reputation for more volume.

The surge in ES sales is the result of aggressive price cutting, putting the ES300h into a very good position. The ES200 is almost into Camry territory with all the premium amenities. The NX is a HUGE hit just like everywhere else, although it still needs cheaper prices to be the true king of premium compact SUV. NX is the no.1 driving force for Lexus' push into younger demographics, not some fancy F-sport/F cars.

Gecko
I wonder if the booming Chinese market bodes well for the GS? The Chinese are known to like LWB versions of their entry level and midsize sedans vs. all out flagships, so we've seen Mercedes, BMW and Audi offer LWB versions of the E, 5 and A6 there.
The answer is no. Young people don't buy GS or IS, these two models are dead here. As I've mentioned above, a younger ownership demographic doesn't mean the "sport models" do well. Lexus has some hope to revive the IS by offering a LWB model. Trust me, the rear seats in the 3L/A4L are comparable to full-size cars, they are huge. GS-L won't work since the ES will outsell it just like in the US. The next ES will be full sized like A6L/E-Class L/5L to fill the demand. Current ES is considered too small for many business people here.

A really interesting niche Lexus could take advantage of in China is the luxury MPV market. The Toyota Alphard is (weirdly enough) a huge hit and selling like hot cakes among business owners. It is considered the most prestigious vehicle for VIP transport and any attempt by others to invade the niche have ended very poorly. Lexus could simply launch a rebadged/restyled Alphard to further lock down this market.
S
ssun30
Despite the great growth Lexus is still tiny compared to the German Big Three. With undersized engines and domestic production (both result in reduced taxes) the Big Three are able to significantly undercut Lexus in price, which used to be Lexus' biggest advantage over them. From what I've seen in China (and feedback from dealerships), Lexus is on retreat with almost every model being unable to compete head to head against European marques.
they are not on retreat if their sales are up by 24% :).

So yeah, while they can sell more with local production, they are selling better than ever right now... new ES, new UX will only do better.
S
spwolf
they are not on retreat if their sales are up by 24% :).

So yeah, while they can sell more with local production, they are selling better than ever right now... new ES, new UX will only do better.
"On retreat" is a comparative term. 24% is not really impressive in a very fast expanding premium market.

You are definitely right that the new ES and UX will probably reboot the brand if Lexus gets the pricing right. The subcompact SUV boom is just about to start here, maybe from early 2018. The only potential rival for the UX is the X1, and that SUV has very poor reputation here because of the very unreliable Inline-3.
S
ssun30
"On retreat" is a comparative term. 24% is not really impressive in a very fast expanding premium market.

You are definitely right that the new ES and UX will probably reboot the brand if Lexus gets the pricing right. The subcompact SUV boom is just about to start here, maybe from early 2018. The only potential rival for the UX is the X1, and that SUV has very poor reputation here because of the very unreliable Inline-3.
it is not on retreat in any way possible... of course that it would be better for them to be 5x, but keep in mind that Lexus worldwide sales are just 677k per year.

Lexus sold 67k cars in 2012 in China, will sell 2x that in 2017. Thats excellent growth regardless of how you are looking at it.

Their ceiling will likely be 150k until they build a factory there.
zeusus
Lexus is doing well considering their late entry into China, lack of a factory and tax incentives and weak cultural relationship with Japan.

Chinese like big and bold so the Spindle feels like a natural in the Chinese market.
LDeleuran
ssun30
"On retreat" is a comparative term. 24% is not really impressive in a very fast expanding premium market.

You are definitely right that the new ES and UX will probably reboot the brand if Lexus gets the pricing right. The subcompact SUV boom is just about to start here, maybe from early 2018. The only potential rival for the UX is the X1, and that SUV has very poor reputation here because of the very unreliable Inline-3.
It could technically be seen as a retreat if the competition had larger growth (like seen in Europe). So I ran the numbers:

2015 -> 2016:

Audi: 509.998 -> 536.289 (5%)
MB: 255.270 -> 326.690 (28%)
BMW: 287.000 -> 310.000 (8%)

So Lexus is gaining, but MB is gaining even more and from a greater starting point as well.
krew
LDeleuran
It could technically be seen as a retreat if the competition had larger growth (like seen in Europe). So I ran the numbers:

2015 -> 2016:

Audi: 509.998 -> 536.289 (5%)
MB: 255.270 -> 326.690 (28%)
BMW: 287.000 -> 310.000 (8%)

So Lexus is gaining, but MB is gaining even more and from a greater starting point as well.
I found 2016-2017 sales figures, and it shows just how far behind Lexus really is:

Jan-Jul 2016 -> Jan-Jul 2017
  • Audi: 319.7k -> 239k (-25%)
  • MB: 171.8k -> 257k (49.7%)
  • BMW: 166.6k ->215k (29.0%)
Mind you, these are only sales from locally produced models in China -- the total numbers could be much higher.

http://carsalesbase.com/china-car-sales-data/
mikeavelli
Gecko
I wonder if the booming Chinese market bodes well for the GS? The Chinese are known to like LWB versions of their entry level and midsize sedans vs. all out flagships, so we've seen Mercedes, BMW and Audi offer LWB versions of the E, 5 and A6 there.

I'm not sure how much more Lexus can stretch out the TNGA FWD architecture to be a fit in this space if they're going to make the new ES Avalon-sized to begin with. Something RWD on GA-L, that has easier scalability past being midsize might be easier. GS might give them the leverage between ES and LS in a market that's lighter on flagships.

RX L will probably be a big hit in that market.
I heard rumors of a LWB GS... but seems that is all it was.... :(

Great to see Lexus improving not just in Europe but in China!
Yuan
Why are you guys so obsessed with numbers, BBA all have small engine domestically made cars that shoudn't even be considered as luxury cars. How do you even drive a C180L that is the same size as an E SWB? MB is doing really well not because of anything, but because their cheap models look identical to their expensive S class for the average buyers. So people can spend less money while still looking "rich"
LDeleuran
Well. In my case Lexus has withdrawn from my country due to poor sales. If I want a new Lexus, I would have to pay roughly 20% more than a similar equipped German saloon. If Lexus were to succeed in the global market and Europe in particular, then chances are that Toyota will consider reintroducing Lexus here. As it is, I have to pay roughly $90.000 for a used 2012 GS450h. I love Lexus, but I can't in good conscience pay that when I can get a similar new 2018 5-series for the same money.


I cheer every time we get good news like this.
mikeavelli
Yuan
Why are you guys so obsessed with numbers, BBA all have small engine domestically made cars that shoudn't even be considered as luxury cars. How do you even drive a C180L that is the same size as an E SWB? You can hardly even see anything that start with "3" in BBA cars (SUV excluded). MB is doing really well not because of anything, but because their cheap models look identical to their expensive S class for the average buyers. So people can spend less money while still looking "rich"
The brands need volume to be profitable. I do agree its a bit apples to oranges in regards to engines. Lexus engines there, even downsized are much larger in most cases than the Germans. As a member stated they also are not produced there.
S
krew
I found 2016-2017 sales figures, and it shows just how far behind Lexus really is:

Jan-Jul 2016 -> Jan-Jul 2017
  • Audi: 319.7k -> 239k (-25%)
  • MB: 171.8k -> 257k (49.7%)
  • BMW: 166.6k ->215k (29.0%)
Mind you, these are only sales from locally produced models in China -- the total numbers could be much higher.

http://carsalesbase.com/china-car-sales-data/
MB is on fire in recent years, fully taking advantage of Audi's downfall (a result of Xi's crack down on corruption). Local production of the W213 E-class and GLC consolidated MB's dominance in the ¥300k-500k range, the sweet spot for the premium market. Then it augmented volume with the dirt cheap C-class L.

Yuan
Why are you guys so obsessed with numbers, BBA all have small engine domestically made cars that shoudn't even be considered as luxury cars. How do you even drive a C180L that is the same size as an E SWB? You can hardly even see anything that start with "3" in BBA cars (SUV excluded). MB is doing really well not because of anything, but because their cheap models look identical to their expensive S class for the average buyers. So people can spend less money while still looking "rich"
At least MB didn't go as far as BMW. The abomination BMW has made called the FWD 1-series sedan helped its volume but at the cost of severely damaged reputation. The unreliable inline-3 was such a flop.

I think there are two ways for Lexus to breakthrough Big Three's dominance without sacrificing quality/reliability through full local production:
1) Make PHEVs, lots of them. PHEVs get very lucrative incentives in major cities like Beijing and Shanghai. The free license plate alone is worth ¥60k-200k ($9k-30k) depending on region and category, not to mention a variety of subsidies. IMO the lack of PHEVs is the single biggest problem with Lexus' line-up, not just in China but everywhere else. (a hint to some members of this forum: please stop assuming Lexus' problem is not having sporty/powerful cars)
What Lexus could do is to assemble some entry-level models (CT/UX/"IS-L"/NX) at FAW/GAC Toyota's facility as CKDs, but with locally produced hybrid drivetrain. FAW and GAC have mastered production of THS at a very low cost. The Corolla/Levin hybrids are not only cheaper than the USDM Prius, but even cheaper than the gas-only Corollas built locally. They will soon release the Corolla/Levin PHEV, possibly priced at ¥150-170k ($21k-24k). That's cheaper than the Yaris (!) after incentives.
By doing so, Lexus would effectively undercut the Big Three by a fifth to a third, which is a huge gain.
2) Make LSS+ a standard package on all trims of everybody model. Toyota made some waves in the U.S. after announcing all MY2018+ cars will have TSS as standard. Right now only the top trims of the IS, ES, NX, and the RX receive LSS+ in China, but these top trims are usually overpriced and sell in very limited volume. Lexus can topple Volvo as the safest premium brand by offering LSS+ on every car it sells, since Volvo also only offer active safety systems on top trims.

S