Japanese "God Car" begins to fight back

Author | Chai Xuchen

Editor | Wang Xiaojun

Rumors of Lexus establishing a factory in China have resurfaced, and this time it is likely aimed at new energy.

Recently, there have been reports that Toyota Motor plans to build a new factory in Shanghai, primarily for the production of electric models under its luxury brand Lexus. Unlike previous joint ventures, Lexus is looking to establish a 100% wholly-owned factory in China.

It is understood that Toyota has confirmed the construction site for the factory within Shanghai, and the factory is expected to commence production in 2027. The plan is to achieve a local parts usage rate of over 95%, with new cars produced not only for domestic sales but also for simultaneous export overseas.

Currently, both Toyota China and Lexus have declined to comment on this, but insiders have revealed to Wall Street News that the rumors are credible, and negotiations between the two parties have entered the final stages, with a few details still pending agreement.

It is worth mentioning that in June of this year, Toyota's president Akio Toyoda visited China for the first time in five years, showcasing drifting at the "Toyota GR Carnival" in Shanghai. At that time, there were rumors that he would promote the localization of Lexus, and Toyota began discussions with relevant departments, hoping to receive similar treatment to Tesla in China, including tax incentives, policy support, and wholly-owned operations.

It should be noted that this Japanese luxury car brand, which insists on high quality and original imports, has seen all its products in high demand since entering the Chinese market in 1994, creating a sales myth that once overshadowed BBA, with price increases for vehicle purchases becoming the norm.

Since then, rumors about its factory establishment in China have been constant but ultimately came to nothing. Insiders revealed that Lexus did indeed have thoughts of localization in the past, but Toyota's senior management always believed the timing and conditions were not mature enough.

Toyota's change in attitude this time indicates that it is ready to launch a counterattack in the high-end new energy vehicle market.

According to Toyota's "Electric Vehicle First" strategy, the company plans to introduce 10 pure electric vehicles by 2026, with annual sales reaching 1.5 million units, and pure electric vehicle sales reaching 3.5 million units by 2030. Lexus will play a leading role, emphasizing at this year's Tokyo Motor Show that it will begin its electrification transformation in 2026 and become a fully electric brand by 2035.

The bold statements are a response to the pressure from Tesla and China's new energy brands.

During the era of fuel vehicles, Lexus was always Toyota's profit cow in the Chinese market. However, as intelligence and electrification became mainstream, and BBA were caught up in a price war, the once coveted Lexus has lost its charm.

The unique Lexus-style service has been surpassed by new forces like Nio, which not only successfully replicated Lexus's "champagne tower" but also attracted a number of high-net-worth clients with its NIO House and concierge-style services.

Since reaching a sales peak of 227,000 units in China in 2021, Lexus has entered a downward trend, dropping to 162,000 units in the first 11 months of this year, which is still a result of "trading price for volume," marking the end of its nearly 30 years of glory More importantly, Lexus has been indecisive in its transformation until it launched its first pure electric model, the RZ450e, in February last year, but its configuration and performance are not outstanding compared to its peers.

It can be said that this high-end Japanese brand, which once challenged established luxury car makers, seems to be fading into obscurity and is about to be overtaken by the new generation. To turn the situation around, accelerating the pace of transformation has become inevitable, and China's market along with its gradually improving new energy supply chain may provide support for its comeback.

Industry analysts point out that in recent years, China has established a complete parts supply chain in the field of new energy vehicles, and Toyota can leverage this to complete the localization of Lexus in the shortest time possible, improving production efficiency and reducing production costs, thereby launching competitive new models.

Coincidentally, Volkswagen and Audi have already utilized Chinese R&D capabilities to develop cooperative models, and for Toyota to catch up in electrification, the Chinese market is indeed the best soil. Relevant institutions have also pointed out that due to the significant fluctuations in electric vehicle demand, and since China is the world's largest electric vehicle consumer market, placing production bases in China is a reasonable choice.

If Lexus's factory in China can be successfully established, Toyota's high-end new energy counterattack will have a fulcrum.

But this is just the beginning. Although domestic production has many advantages, the key challenge Lexus will face next is how to regain consumers in an environment where market demand is rapidly changing and new forces are making aggressive moves, while avoiding a price war with local brands.

For traditional automotive giants like Toyota, successfully pivoting to achieve localized production of Lexus in China and launching high-end electric vehicles still involves many hurdles to overcome