Gasgoo.com (Shanghai October 23) - Whether it be in the world's largest luxury automobile market - the United States - or the world's fastest growing luxury automobile market - China - top three Japanese luxury brand Lexus's performance has left a lot to be desired.
Prior to 2011, Lexus was able to utilize the strides Toyota has made in the American market to become the top selling luxury brand in the country. However, this year it has lost the crown as rivals BMW and Mercedes-Benz have quickly caught up. BMW and Mercedes-Benz's American vehicle sales over the first six months of this year totaled 157,382 units and 151,624 units, respectively. By comparison, Lexus' sales for the time period was 138,689 units.
Meanwhile, in the Chinese luxury automobile market, Lexus has also fallen behind its rivals. Previously Lexus was just behind the German big three of Audi, BMW and Mercedes-Benz. However, recently it has been surpassed by Jaguar Land Rover and Volvo, leaving it in an unenviable sixth place.
Actually, looking at its sales growth figures, Lexus has performed reasonably well. Its year-on-year sales growth rate of 31.2 percent seems very good, nearly on the level of the Chinese luxury automobile market's average growth rate of 32 percent. However, its performance is not on the level of its competitors. Fellow Japanese luxury manufacturers Infiniti and Acura posted sales growth rates of 130.2 percent and 78.2 percent for the same time period, respectively. Jaguar Land Rover and Volvo's sales growth rates were 48.5 percent and 34 percent, respectively. Likewise, rising entrant Cadillac, who ranks closely behind Lexus, saw its sales grow 71.7 percent. All of these manufacturers' growth rates are higher than those of Lexus', allowing manufacturers ahead of it in terms of sales volume to widen their lead and those behind it to catch up.
Lexus' major problem in the Chinese market has been its failure to find a successful local partner to work with. The key to success for foreign manufacturers in China, whether they be Japanese, American or European, is to find a local enterprise who understands the market to work with. In 1988, Audi and FAW Group signed the country's first premium automobile technology transfer agreement, which led to the eventual domestic manufacture of Audi vehicles. The manufacturer has strongly benefited from this agreement, as it still holds the dominant number one position in the luxury segment.
Other manufacturers tried to mimic Audi's example, with Volvo going as far as to be bought out by Geely. Just recently Infiniti and Dongfeng agreed to a partnership, with their first domestically manufactured model being released by the end of this year. Meanwhile, the first Chinese Cadillac will be made next year.
In regards to domestic production, Lexus is lagging far behind its rivals. Relying on entirely on imported model sales, Lexus is responsible for paying the 25 percent import tax, which causes its costs and prices to be higher than its rivals, which is fatal considering the fiercely competitive nature of the Chinese automobile market.
The negative effects of this refusal to domestically manufacture vehicles is compounded by the hostile feelings a lot of Chinese consumers have towards importing Japanese vehicles. Likewise, being able to manufacture vehicles domestically allows manufacturers to better tailor their products to meet the needs of increasingly diverse and individual Chinese automobile consumers. A major reason the big three German manufacturers are performing so well in the country is due to their close partnerships with local enterprises who better understand the unique landscape of the Chinese automobile market.
