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.
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.