Unlike German peers Audi, Volkswagen AG's <VOWG_p.DE> luxury
division and BMW <BMWG.DE>, Lexus imports all of its vehicles sold
in China, from Japan.
But high tariffs charged on imported cars make it hard to generate
volume and last year, Lexus sold around a seventh of Audi's tally
and a fifth of what BMW sold in China.
Tokuo Fukuichi, the head of relative newcomer Lexus, said at the
Auto China car show that he prioritizes the quality of vehicles over
"The German Three have a brand image that they have cultivated over
the past century in their long history, but Lexus is not in people's
minds like that yet," said Fukuichi, who is also Toyota's Senior
Managing Officer, referring to Audi, BMW and Mercedes-Benz <DAIGn.DE>.
"Customers would leave us if we have any problems with quality
because that is what they are seeking in a Lexus," he told Reuters.
Fukuichi said that Lexus has been considering the possibility of
manufacturing in China but no specifics were being discussed and
nothing has been decided.
Lexus, which was launched in 1989, took nearly 15 years to start
manufacturing outside of Japan at a plant in Canada. It still makes
much of its vehicles in Japan but last year it said it will also
start production in its biggest market, the United States, in 2015.
Its choice to import its vehicles into China, Lexus's second biggest
market, has kept prices high. The entry-level Lexus ES, the brand's
best-selling vehicle in China, has a starting price of about $57,700
there, compared to $36,620 in the United States.
Other Japanese premium brands have already made a move to start
production in China.
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Nissan is set to start manufacturing its luxury arm Infiniti's Q50
sedan and QX50 crossover at an existing Nissan plant in Hubei
province later this year, while Honda <7267.T> aims to build Acura
in China from 2016.
Infiniti's President Johan de Nysschen said that production in
China may initially turn out to be more expensive than making
vehicles in Japan because there could be less economy of scale.
But overall product pricing would become more competitive without
tariffs and locally made parts tended to cost less, he said.
"You cannot compete against your localized competition with an
imported car," he told Reuters.
China's premium car demand is likely to reach 2.7 million cars a
year by 2020, which would make China the world's biggest premium car
market ahead of the United States.
In 2013, Lexus sold around 70,400 vehicles in China, up 16 percent
from a year ago, according to data from LMC Automotive. Lexus does
not disclose China sales figures.
Lexus unveiled its new NX compact crossover SUV at the auto show on
Sunday, which competes with Audi's Q3 and BMW's X1.
(Editing by William Hardy)
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