Last Friday, Toyota Motor Corporation began production of its refreshed Lexus ES luxury model in Japan as part of its goal of producing approximately three million vehicles in its home market.
Despite the fact that the strong yen has made exporting less profitable for Japanese automakers, the RS SUV is the only Lexus model currently being produced outside Japan. Although Toyota produces about 40 percent of its vehicles outside Japan, company officials are confident that its strategy of making most Lexus models in its home market will pay off.
Lexus International executive vice president Kazuo Ohara said, “We have no plans to endure to a point that our business won’t function. But for cars like the ES, we are seeing cost levels that will allow us to continue producing even if the yen is at 80 yen against the dollar.” He went on to say, “Our policy is to protect manufacturing in Japan as much as possible for as long as possible.”
Lexus’ made-in-Japan strategy has made it harder to compete in a number of overseas markets, including China which imposes a 25 percent tariff on imported luxury models.
IHS Automotive manager of vehicle forecasting for Japan and Korea Masatoshi Nishimoto thinks Toyota may eventually be forced to move production of its Lexus nameplate overseas. “At some point Toyota may have to move production abroad to compete on the cost front,” he said.
Toyota predicts the new 2013 Lexus ES model line will increase global sales by more than 60 percent, and is hopeful that it will help it regain the title of best-selling luxury brand in the U.S. BMW overtook Lexus to claim the title late last year due to production and shipping disruptions brought on by the Japan earthquake and tsunami.
The revamped Lexus ES will be built on the Toyota Avalon platform and is targeted at younger American consumers. Competitors in its class include the Mercedes C-class, BMS 3-series and Infiniti G sedans. During the first six months of this year, sales of the current model ES increased by 10 percent in the U.S., and accounted for 18 percent of Lexus’ total sales worldwide.