Akio Toyoda also wants to learn from Elon Musk

Author | Chai Xuchen

Editor | Zhou Zhiyu

After five years, Toyota Motor Corporation Chairman Akio Toyoda made a rare visit to China and showcased his driving skills at the Shanghai GR Racing Carnival. Along with him, there were also developments regarding the localization of Lexus. He is preparing to follow Elon Musk's path to success.

According to reports, one of Akio Toyoda's agendas for this visit to China is to establish a Lexus factory in Shanghai, specifically for producing high-end electric vehicles. He is seeking treatment similar to Tesla, including tax breaks, policy support, land grants, and conditions for sole operation.

In contrast to Toyota China's previous firm denials, they chose not to respond to this rumor when approached by Wall Street News.

Over the past twenty years, due to increasing sales, there have been occasional rumors about Lexus setting up factories in China, especially after BMW, Mercedes-Benz, Land Rover, and other luxury car brands began localizing production. However, after internal deliberations, the domestic production plan was always put on hold.

But this time, it will be the closest Lexus has come to localization. Currently, it is facing unprecedented challenges in the Chinese market.

After 17 consecutive years of growth, Lexus experienced a downward trend in 2022, with sales in the Chinese market reaching 183,900 units, a year-on-year decrease of 18.6%. In the first half of last year, the top-selling imported car brand in China shifted from Lexus to Mercedes-Benz.

In contrast, last year, Lexus saw growth of over 20% in all global markets outside of China, with year-on-year growth rates exceeding 60% in regions such as the Middle East, Japan, and East Asia, reaching up to 130%.

In the first five months of this year, although Lexus sales in China increased by nearly 30% year-on-year, reaching 69,000 units, it was a result of "trading price for volume." Sales personnel revealed that the main product, Lexus ES, which required an additional 10,000 to 20,000 yuan in previous years to purchase, is now being heavily discounted in many regions, with discounts of up to nearly 90,000 yuan, resulting in a final price reduction to over 200,000 yuan.

Insiders close to Lexus pointed out that such "trading price for volume" not only damages the brand but also raises greater uncertainties about whether reducing prices can continue to stimulate market demand.

Significantly reducing prices is a huge blow to Lexus in terms of market confidence, as its once proud high resale value advantage will be eroded.

According to data from the China Automobile Dealers Association, Lexus's three-year resale rate dropped from 87.5% in 2021 to 58.3% in June this year, shrinking by one-third. In addition, Lexus, known for its service, has been surpassed by players like Nio.

The decline in retail prices has put pressure on frontline dealers. Executives at Toyota China have sounded the alarm, pointing out that due to market pressures, dealer profits have declined and even losses have occurred. If this trend continues, a large number of fuel vehicle dealers may exit the market by 2024, posing a significant challenge to the brand. "We are trying to find ways to address this issue." Today, new energy vehicles are accelerating to erode the market share of traditional oil cars, with Aito leading the charge to disrupt the luxury car track. This transformation has made it difficult for Lexus to maintain its "price increase king" myth and has pushed it to a point where it must break through.

The turning point lies in the electrification strategy of the Toyota Group.

In April last year, after the restructuring of the Toyota Group's leadership, its ambiguous attitude towards electric vehicles finally changed. The new president, Konishi Satoshi, proposed to launch 10 pure electric vehicles by 2026, with annual sales of pure electric vehicles reaching 1.5 million units by then; by 2030, this number will further increase to 3.5 million units.

This means that Toyota will be arm wrestling with Musk in two years, and Konishi Satoshi's ambition is hard to conceal.

At this year's Tokyo Motor Show, Lexus announced that the brand will enter the electrification revolution in 2026 and unveiled the LF-ZC concept car. The car will adopt a modular architecture, the production method will undergo significant changes, and the software platform will also be completely redesigned.

Finally determined to focus on electric vehicles, Lexus has also become a hidden danger for its localization.

If Lexus successfully builds a factory in China, a series of mature new energy industry chains in the country will become readily available resources. In fact, Toyota has previously cooperated with partners such as BYD through diversified paths.

At the group level, Toyota's joint venture company in China is moving faster. At the end of June, GAC Toyota announced at Tech Day that it will cooperate with Momenta on the end-to-end technology of intelligent driving systems. Previously, it had already cooperated with Huawei to accelerate localization in the smart cockpit area.

To consolidate its position as the "king" of global car companies, Toyota is speeding up its embrace of the Chinese industry chain.

However, in this round of decisive competition for the future, Lexus may have already missed the opportunity.

As the competition in the domestic new energy vehicle market enters a deep water area, with Aito, Xpeng, Nio, Li Auto taking turns to exert force, the discourse power of the luxury car track is gradually shifting to domestic car companies. At this point, whether Lexus can strive for conditions similar to Tesla's initial conditions remains uncertain.

But Lexus has no way back, it must show greater sincerity and further increase the pace of reform. Because what it influences behind it is the fate of the entire Toyota "giant ship," and even the script of the world automotive industry.

In the upcoming wave of change, Lexus and Toyota are unwilling to be lost in the crowd