Lexus China Sales Up 24% Year-Over Year

It will bring a huge boost indeed! Remember it's the last luxury brand where people can buy a true non-local production vehicle. That Made in Japan quality actually matters a lot here (at least until there is another anti-Japan protest).

Earlier this year the local dealership told me they are going to slash LS prices by at least ¥100k ($15k) and I found it suspicious. Now it makes sense. Maybe I should go for the LS500h in the end.

It's official: per a Reuters story, China will cut automobile import tariffs to 15 percent from 25 percent for most vehicles effective July 1. Import tariffs for auto parts would be cut to 6 percent from mostly around 10 percent.

The report states that Toyota "would adjust retail prices for imported cars that benefited from the lower tariffs to provide Chinese consumers with “competitive” products".

7ES delivery will start in August, what a good timing for that car.

An ES200 for under ¥250,000 basically kills anything in that segment, but the FAW Avalon is just around the corner so I doubt they will actually do that. So I think the 7ES will just be 'free upgrades' with no price cut. Chances are the price cuts are mainly for the LS.

Also, it would be nice if they do 'free upgrades' like LSS+ for every trim across their lineup.

ssun30

7ES delivery will start in August, what a good timing for that car.

An ES200 for under ¥250,000 basically kills anything in that segment, but the FAW Avalon is just around the corner so I doubt they will actually do that. So I think the 7ES will just be 'free upgrades' with no price cut. Chances are the price cuts are mainly for the LS.

Also, it would be nice if they do 'free upgrades' like LSS+ for every trim across their lineup.

Did they sell Avalon there before? What are their sales expectations?

Indeed, they might do both, depend what are their own profit margins - reduce the pricing a bit and also increase equipment levels.

spwolf

Did they sell Avalon there before? What are their sales expectations?

Indeed, they might do both, depend what are their own profit margins - reduce the pricing a bit and also increase equipment levels.

Avalon was never sold in China before. People speculate that it might take over the position hold by Crown in China, which is, kind of sad for the legendary model.:(

ssun30

7ES delivery will start in August, what a good timing for that car.

An ES200 for under ¥250,000 basically kills anything in that segment, but the FAW Avalon is just around the corner so I doubt they will actually do that. So I think the 7ES will just be 'free upgrades' with no price cut. Chances are the price cuts are mainly for the LS.

Also, it would be nice if they do 'free upgrades' like LSS+ for every trim across their lineup.

Yes “free upgrade” could be a good solution, I also thought of that. But I also noticed that people do not related Toyota and Lexus together so often in China. They perceive them as different brand and the target audience are quite different. In that way that might not be a huge concern. We just over thought it

spwolf

Did they sell Avalon there before? What are their sales expectations?

Indeed, they might do both, depend what are their own profit margins - reduce the pricing a bit and also increase equipment levels.

Definitely lower than the target set for the GAC Camry (10k per month), since it's a bigger and more expensive vehicle. I think it's around 60k per year.

Except the Crown already overshot that figure with the recent model year update. That came as a surprise to FAW as they thought the Crown was dead.

ssun30

Definitely lower than the target set for the GAC Camry (10k per month), since it's a bigger and more expensive vehicle. I think it's around 60k per year.

Except the Crown already overshot that figure with the recent model year update. That came as a surprise to FAW as they thought the Crown was dead.

i dont think you guys need to worry about Crown... it is priced above Avalon and sells well, with new version coming in japan next month.

also if they are selling that amount of Crown, then they were expecting it or else they would be producing less... tps, jit, etc.

spwolf

also if they are selling that amount of Crown, then they were expecting it or else they would be producing less... tps, jit, etc.

The Reiz/Mark X is gone, so they are using the excess capacity to produce the Crown. But their new facilities are converted to GA-K already, so the Crown is heading to the chopping board for sure.

I think in the U.S. the Avalon is priced 25-30% above the Camry? Following that rule, FAW could price it at ¥260k-350k (Camry 2.5/Hybrid is 200k-270k) which is slightly below the Crown (¥290k-390k). Seeing how the 7ES is going to start a bloody price war in the premium mid-to-full size segment, I think such a price drop should be expected. There's no way a ¥390k Avalon can survive against a ¥390k ES. Everyone is paranoid about the 7ES at this point.

ssun30

The Reiz/Mark X is gone, so they are using the excess capacity to produce the Crown. But their new facilities are converted to GA-K already, so the Crown is heading to the chopping board for sure.

I think in the U.S. the Avalon is priced 25-30% above the Camry? Following that rule, FAW could price it at ¥260k-350k (Camry 2.5/Hybrid is 200k-270k) which is slightly below the Crown (¥290k-390k). Seeing how the 7ES is going to start a bloody price war in the premium mid-to-full size segment, I think such a price drop should be expected. There's no way a ¥390k Avalon can survive against a ¥390k ES. Everyone is paranoid about the 7ES at this point.

depends on engines really, it is not that much more expensive when equipped the same. You can also say that Avalon is 15% cheaper than ES, with same engine, together with no import tax, it could be cheaper than that.

I am not sure that their factories are so inflexible, looking at their 30-35k sales for Crown per year, I think they will want to continue that. In general, Toyota is not concerned about competition between Toyota and Lexus anyway.

ssun30

The Reiz/Mark X is gone, so they are using the excess capacity to produce the Crown. But their new facilities are converted to GA-K already, so the Crown is heading to the chopping board for sure.

spwolf

You can also say that Avalon is 15% cheaper than ES, with same engine, together with no import tax, it could be cheaper than that.

With Avalon seemingly headed towards Chinese production, I wonder if that's opening the door for eventual Chinese production of the closely-related Lexus 7ES as well?

@ssun30 : Any idea when Avalon is expected to launch in China?

Joaquin Ruhi

With Avalon seemingly headed towards Chinese production, I wonder if that's opening the door for eventual Chinese production of the closely-related Lexus 7ES as well?

@ssun30 : Any idea when Avalon is expected to launch in China?

It is unlikely that Chinese production will happen anytime soon for Lexus, especially since they reduced import tariffs.

ssun30

The Reiz/Mark X is gone, so they are using the excess capacity to produce the Crown. But their new facilities are converted to GA-K already, so the Crown is heading to the chopping board for sure.

I think in the U.S. the Avalon is priced 25-30% above the Camry? Following that rule, FAW could price it at ¥260k-350k (Camry 2.5/Hybrid is 200k-270k) which is slightly below the Crown (¥290k-390k). Seeing how the 7ES is going to start a bloody price war in the premium mid-to-full size segment, I think such a price drop should be expected. There's no way a ¥390k Avalon can survive against a ¥390k ES. Everyone is paranoid about the 7ES at this point.

I think I have seen reports saying Lexus IS planning to build IS in FAW facilities. If that ends up to be true, then Crown could share the same GA-L assembly line I assume? But all this was before they decided to introduce Avalon. So we’ll see.

Joaquin Ruhi

With Avalon seemingly headed towards Chinese production, I wonder if that's opening the door for eventual Chinese production of the closely-related Lexus 7ES as well?

@ssun30 : Any idea when Avalon is expected to launch in China?

Not sure about ES series, but I heard the biggest challenge for domestic production of Lexus in China is the split of interest between Toyota’s two joint venture partners： GAW and FAW groups. An earlier proposal was IS(GA-L) for FAW and NX (GA-C?) for GAW. So we don’t know where ES will go considering GAW is producing Camry and FAW Avalon very soon, or maybe it will just wait longer.

amoschen7

I think I have seen reports saying Lexus IS planning to build IS in FAW facilities.

Are any of those reports in English? Or are they all Chinese-language?

amoschen7

Not sure about ES series, but I heard the biggest challenge for domestic production of Lexus in China is the split of interest between Toyota’s two joint venture partners: GAC and FAW groups.

That's true. If Lexus starts with a single model, you give it to one and anger the other. And setting up both FAW and GAC for Lexus-caliber quality and production processes doubles Toyota's expenses.

amoschen7

An earlier proposal was IS (GA-L) for FAW and NX (GA-C?) for GAC.

The next NX is expected to move to the Camry/Avalon GA-K platform, as its fraternal Toyota twin RAV4 just did for its 5th generation.

amoschen7

So we don’t know where ES will go considering GAC is producing Camry and FAW Avalon very soon, or maybe it will just wait longer.

Interesting. Here in the U.S., Camry, Avalon and Lexus ES are all built in different sections of the same Georgetown, Kentucky plant. With both FAW and GAC building (TN)GA-K models, a theoretical Chinese ES could go either way (although FAW might have the upper hand since ES is closer to Avalon than to Camry).

spwolf

It is unlikely that Chinese production will happen anytime soon for Lexus, especially since they reduced import tariffs.

It's true that the reduced tariffs also remove much of the urgency to start Chinese production. Lexus will probably take a wait-and-see attitude and see what price reductions do for their sales.

Joaquin Ruhi

Any idea when Avalon is expected to launch in China?

Probably next year.

amoschen7

I think I have seen reports saying Lexus IS planning to build IS in FAW facilities.

Joaquin Ruhi

Are any of those reports in English? Or are they all Chinese-language?

Chinese auto press are consistently unreliable when it comes to rumors. We've been hearing about the Corolla getting the BMW B38 (1.5t Inline-3) since 2015 except it's not happening. They predicted last year the new GA-L Crown will be produced at FAW when there was solid information on Avalon replacing the Crown. They even reported end of Prado production when that thing is selling 5k per month (although the recent facelift is a major flop and end of production could be a possibility). So I will consider the IS rumor BS with maybe 0.2% credibility.

The IS is the most 'un-China' car you can imagine due to its abysmal rear legroom. They would have to make an IS-L that will basically be the spiritual successor to the GS. Oh, wait, that may actually be a good idea.

Anyway, seeing how the 'unattractive' 6ES is now consistently a best seller, they will have zero incentive to produce 7ES at FAW in the short term. The only way I can see a made-in-China Lexus is after 2022, when China completely removes restrictions on percentage of ownership in the JV (currently 50%) for foreign automakers. That way TMC can have maximum control over every Lexus vehicle produced.

ssun30

Probably next year.




Chinese auto press are consistently unreliable when it comes to rumors. We've been hearing about the Corolla getting the BMW B38 (1.5t Inline-3) since 2015 except it's not happening. They predicted last year the new GA-L Crown will be produced at FAW when there was solid information on Avalon replacing the Crown. They even reported end of Prado production when that thing is selling 5k per month (although the recent facelift is a major flop and end of production could be a possibility). So I will consider the IS rumor BS with maybe 0.2% credibility.

The IS is the most 'un-China' car you can imagine due to its abysmal rear legroom. They would have to make an IS-L that will basically be the spiritual successor to the GS. Oh, wait, that may actually be a good idea.

Anyway, seeing how the 'unattractive' 6ES is now consistently a best seller, they will have zero incentive to produce 7ES at FAW in the short term. The only way I can see a made-in-China Lexus is after 2022, when China completely removes restrictions on percentage of ownership in the JV (currently 50%) for foreign automakers. That way TMC can have maximum control over every Lexus vehicle produced.

Lexus will make cars in China when it can make them cheaper than in Japan. And by cheaper I mean total cost of investment + production costs.

Maybe when sales of ES, RX and NX reach some target like 200k-300k vehicles, it will make more sense? With EU agreements with Japan, Canada and EU, US and Korea, it is becoming cheaper for them to export from Japan, USA and Canada, so Chinese production has to be for China only.

Joaquin Ruhi

Are any of those reports in English? Or are they all Chinese-language?


That's true. If Lexus starts with a single model, you give it to one and anger the other. And setting up both FAW and GAC for Lexus-caliber quality and production processes doubles Toyota's expenses.


The next NX is expected to move to the Camry/Avalon GA-K platform, as its fraternal Toyota twin RAV4 just did for its 5th generation.


Interesting. Here in the U.S., Camry, Avalon and Lexus ES are all built in different sections of the same Georgetown, Kentucky plant. With both FAW and GAC building (TN)GA-K models, a theoretical Chinese ES could go either way (although FAW might have the upper hand since ES is closer to Avalon than to Camry).

The source was in Chinese

Joaquin Ruhi

Are any of those reports in English? Or are they all Chinese-language?


That's true. If Lexus starts with a single model, you give it to one and anger the other. And setting up both FAW and GAC for Lexus-caliber quality and production processes doubles Toyota's expenses.


The next NX is expected to move to the Camry/Avalon GA-K platform, as its fraternal Toyota twin RAV4 just did for its 5th generation.


Interesting. Here in the U.S., Camry, Avalon and Lexus ES are all built in different sections of the same Georgetown, Kentucky plant. With both FAW and GAC building (TN)GA-K models, a theoretical Chinese ES could go either way (although FAW might have the upper hand since ES is closer to Avalon than to Camry).

It was a Chinese report quoting a “leaked” production plan. Here is one link to it:
http://auto.sina.cn/newcar/x/2016-10-14/detail-ifxwvpar8074735.d.html
However a lot had happened since 2016 that could influence the final decision. The trade war going on right now might push Japanese auto OEMs to invest more in China or as @ssun30 said, the reduction of tariffs may discourage them from doing so.

ssun30

Probably next year.




Chinese auto press are consistently unreliable when it comes to rumors. We've been hearing about the Corolla getting the BMW B38 (1.5t Inline-3) since 2015 except it's not happening. They predicted last year the new GA-L Crown will be produced at FAW when there was solid information on Avalon replacing the Crown. They even reported end of Prado production when that thing is selling 5k per month (although the recent facelift is a major flop and end of production could be a possibility). So I will consider the IS rumor BS with maybe 0.2% credibility.

The IS is the most 'un-China' car you can imagine due to its abysmal rear legroom. They would have to make an IS-L that will basically be the spiritual successor to the GS. Oh, wait, that may actually be a good idea.

Anyway, seeing how the 'unattractive' 6ES is now consistently a best seller, they will have zero incentive to produce 7ES at FAW in the short term. The only way I can see a made-in-China Lexus is after 2022, when China completely removes restrictions on percentage of ownership in the JV (currently 50%) for foreign automakers. That way TMC can have maximum control over every Lexus vehicle produced.

I could take your point the IS is not China friendly at the moment but that could be the exact reason why Lexus want to make it in China: to receive exact same treatment as BMW 3-Series. The current IS does not sell because it is the original BMW 3 in Lexus badge. Making a longwheel base version will help a lot. Why do they want to make the hassle? Because the target audience for IS and BMW 3 is critical to their success in China: young, affluent and adventurous owners who love to try new things and will probably stick to the brand when they get older.

amoschen7

The source was in Chinese

It was a Chinese report quoting a “leaked” production plan. Here is one link to it:
http://auto.sina.cn/newcar/x/2016-10-14/detail-ifxwvpar8074735.d.html
However a lot had happened since 2016 that could influence the final decision. The trade war going on right now might push Japanese auto OEMs to invest more in China or as @ssun30 said, the reduction of tariffs may discourage them from doing so.

Thats Toyota launch plans for new vehicles, not local production.

So whats listed under GA-K for 2020-7? Now we can be sure new NX is out in 07-2020, as well as new IS, both of which make sense.

spwolf

Lexus will make cars in China when it can make them cheaper than in Japan. And by cheaper I mean total cost of investment + production costs.

Maybe when sales of ES, RX and NX reach some target like 200k-300k vehicles, it will make more sense? With EU agreements with Japan, Canada and EU, US and Korea, it is becoming cheaper for them to export from Japan, USA and Canada, so Chinese production has to be for China only.

I would say cost should not be the only concern when planning a overseas production plant. Politics stability and production capabilities are also very important. Remember back in 2013 the island dispute between China and Japan made a huge slash on Japanese car sales. It was that year Passat (EU version) and Magotan (Passat US version) exceeded Camry and Accord in Chinese market. The same happens across other level of cars and SUVs too.
At the moment Lexus is well received in a lot of places in China, but their sales number is not impressive because of limited dealerships and production capacities. You have to order your car to be produced instead of getting it right from the dealship for quite a few models.
It all depends how Toyota sees the future market in China and how much they want to invest.

spwolf

Thats Toyota launch plans for new vehicles, not local production.

So whats listed under GA-K for 2020-7? Now we can be sure new NX is out in 07-2020, as well as new IS, both of which make sense.

If you take a closer look you can see there is also manufacturers associated with each model.
That’s why they say domestic production.
But it is old news in 2016, a lot might have changed since.

amoschen7

If you take a closer look you can see there is also manufacturers associated with each model.
That’s why they say domestic production.
But it is old news in 2016, a lot might have changed since.

It looks very much like Toyota model plan not local production. ES will certainly not be produced there in 3 months, nor will be NX and IS.
It basically lists FMC for Toyota and Lexus, of course Toyota will be locally produced.

It takes them at least 3-4 years from announcing the factory to production, since it requires negotiation with local government on subsidies and tax breaks.
So new factory will not automatically appear, it will have to be announced long before that.

Plus with drop in tariffs, it is unlikely it will happen until they get a lot more sales from their GA-K vehicles at least. Something like IS will likely never be produced in China.

Lexus China announced that it will cut the retail price for most of its models in response to the tariff cut:
http://www.lexus.com.cn/node/3303
I can not find the reference for LS
For current NX ES and RX the price cut for base model is around $3,000, with the the retail price for NX and ES are around $47,000 and RX being $62,500.
They did not mention IS/GS/LC in the news.

amoschen7

Lexus China announced that it will cut the retail price for most of its models in response to the tariff cut:
http://www.lexus.com.cn/node/3303
I can not find the reference for LS
For current NX ES and RX the price cut for base model is around $3,000, with the the retail price for NX and ES are around $47,000 and RX being $62,500.
They did not mention IS/GS/LC in the news.

table below that article has every single car and edition listed with new pricing... can you guys check how good is the pricing and how it compares to before?

spwolf

table below that article has every single car and edition listed with new pricing... can you guys check how good is the pricing and how it compares to before?

My bad... did not notice there is a table.
But it only provides the price after change. You can get the USD equivalent of the each price by deviding 6.4 at the moment.
I do not remember the previous price other than base NX ES and RX, so I could only guess the cut is about 7% over all. The larger displacement models probably benefit modestly more by this policy.

spwolf

table below that article has every single car and edition listed with new pricing... can you guys check how good is the pricing and how it compares to before?

It's a 7-8% drop across the board. However before the tax reduction Lexus dealers are already offering these prices. With the price drop they are unlikely to continue the same cash incentive and instead resort to better financing packages like more 0% APR offers. Customers won't get the full benefit of this price drop, but it's a good thing as dealers can now make more money and maintain a higher standard of service.

I wonder if weak LS sales are because of these price drops. Dealers got the message in January and told some core buyers to hold off the purchase. I erroneously reported that Lexus dealers have to offer incentive packages to sell the LS, but it seems that they are just getting ready for the price drop. We'll see the true sales figures of the LS after July.

ssun30

It's a 7-8% drop across the board. However before the tax reduction Lexus dealers are already offering these prices. With the price drop they are unlikely to continue the same cash incentive and instead resort to better financing packages like more 0% APR offers. Customers won't get the full benefit of this price drop, but it's a good thing as dealers can now make more money and maintain a higher standard of service.

I wonder if weak LS sales are because of these price drops. Dealers got the message in January and told some core buyers to hold off the purchase. I erroneously reported that Lexus dealers have to offer incentive packages to sell the LS, but it seems that they are just getting ready for the price drop. We'll see the true sales figures of the LS after July.

I doubt Lexus told dealers to wait for sales, it is likely they simply dont have enough production since Japanese first few months demand was too crazy.

The Lexus NX soars 56% year-on-year to #3. ES up 14%.

https://bestsellingcarsblog.com/2018/05/china-imports-april-2018-lexus-up-34-to-2-below-mercedes/