For a while now, China's spiraling wealth, population and development has had the world's luxury automakers in an expansionist fervor, with many executives exhibiting the sort of gleefully maniacal behavior historically reserved for gold-rush prospectors. Yet Toyota, of all companies, is exercising a surprising amount of caution in the Asian nation.

As The Wall Street Journal notes, Toyota's premium brand, Lexus, sold all of 64,000 vehicles in China last year, while BMW cleared its books of 326,000. In fact, it didn't even bother entering the market until 2005, while rival Audi built its first car in the market a decade and a half earlier. Even now, Lexus doesn't build any vehicles in China, and with the country's notoriously high tariffs on imports, that's a major disadvantage. Yet the business daily quotes Lexus executive vice president Mark Templin as saying that the brand is nowhere near ready to start building cars in the market. "We're not having those discussions about when we're going to go to China... We have a lot of work to do before we get to that point."

Part of that work includes establishing a more expansive dealer network – Lexus only had 99 stores as of 2012, while rival Mercedes-Benz had over two-and-a-half times as many, and it's still expanding. Adding a lot of dealers without having a goodly number of competitively priced offerings for them to sell may seem like an odd strategy, but Templin tells the WSJ that the goal is to "cultivate our image for quality and customer service and let the customers that we have go tell that story for us."

Do you think this conservative approach to expansion in China will be effective for Lexus? Have your say in Comments.


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  • 35 Comments
      throwback
      • 1 Year Ago
      I can't say I blame Lexus. Based on the political issues between the 2 governments how receptive will affluent Chinese be to a Japanese brand? Especially when Mercedes, Audi and BMW have far more prestige than Lexus.
        Max Bramante
        • 1 Year Ago
        @throwback
        I can't see audi more prestigious than lexus. Mercedes and BMW yes, Audi not at all. Consider this: When Lexus is started with the LS400 (considered the best car in the world during the 90's) audi was an underdog in the F segment with the crappy V8, a very unlucky car in terms of sales by the way even in EU, then Lexus and Audi share the same destiny: Not individual brand like BMW and Mercedes but subsidiary of Toyota and VW. Audi has probably much more models than Lexus and they start from the B segment (soon from the A too) and they have a big market in europe where Lexus is too weak for ancestrals reasons. And of course, audi sell cars in China since early 80's when Lexus was not even born. Last but not least: until today Audi may have blown in its annual AD budget more than double of the whole Toyota group.
          Richard
          • 1 Year Ago
          @Max Bramante
          Not sure I agree Max. Once upon a time Audi, Volvo, and Saab were pretty much even level second tier Euro brands behind MBZ and BMW, but things change. But then Saab lost it's mind, Volvo lost it's way, and Audi stepped up. Audi does not compete in every segment that BMW and MBZ does but where they do they do give a good show. And their interiors are universally regarded as excellent.
          Merc1
          • 1 Year Ago
          @Max Bramante
          You are kidding right? Lexus isn't even based on anything. It is nothing more than a name pulled out of an Toyota executive's arse during a meeting in 1983? Audi has wiped the floor with Lexus in nearly every segment and clearly has more heritage and history. The 2nd best selling luxury name plate in the world vs a North America only special, high end toyota? No contest. You're stuck in the past and Lexus is pretty much over now. BMW and Mercedes has surpassed their best cars now and with the new lame facelifted LS and slowing sales of the GS Lexus is quickly falling behind. They had their run, from 1999-2009 or so. Even before the natural disaster their sales were falling. They produce too many snoozers and the world knows it. M
      Avinash Machado
      • 1 Year Ago
      Japan has still not officially apologized for stuff like the Rape of Nanking.
        Brodz
        • 1 Year Ago
        @Avinash Machado
        That is of course something that sets the cultures at odds. But no reason a Japanese company can't do well selling cars in China.
      Renaurd
      • 1 Year Ago
      It's not so much about Toyota being cautious, it more about the Chinese not buying Japanese cars.
      raughle1
      • 1 Year Ago
      Author needs to learn a little something about international relations before publishing a piece like this. This is what passes for "journalism" in the Blogosphere these days. Don't bother to understand the big picture. Just write the article you want to write and move on. The more you miss the point, the more clicks and comments you'll get anyway.
      LW
      • 1 Year Ago
      I guess Lexus only hope is to tackle other BRIC countries that it has no history of colonizing. Given that those other BRICs' fat cat population is nowhere near China's kleptocratic class, Toyoxus will just have to hope the Germans are stuffing themselves too much in China to not concentrate on those 2nd world countries.
      ShutoSteve
      • 1 Year Ago
      As someone who's ex-girlfriend is from Foshan Guangdong, and who's current girlfriend is from Awaji-Shima in Japan, I can tell you the exact reason why Japanese car makers have no interest in heavily pursuing the Chinese Market: Racism. Simply put, Japanese cars don't sell well in China because they are Japanese cars. The Chinese would rather help build the Chinese economy than buy Japanese, and they have no interest in helping the Japanese economy at all. These are people that are brought up in school with a reverent hate-on for Japan in general. It'll be a long time coming before any Japanese brand ever heavily nosedives into a market they know they can barely make any profit out of.
        GR
        • 1 Year Ago
        @ShutoSteve
        I do want to add that not all Chinese hate the Japanese or their products. I visited Guangzhou less than 2 years ago and the people I met drove a Lexus and a Toyota Crown. They were wealthy business people who are prime luxury car consumers. It's true that the Chinese and Japanese do not get along, but the Chinese will acknowledge that the Japanese have high quality control. The wealthy of China do not trust their government nor their industry and often import products from Europe, the US, and Japan. A young mother I know in China pretty much goes out of her way to get baby goods from Japan which she claims is much better quality and made without questionable materials like Chinese equivalents. Regardless, it's true that the Chinese do not like the Japanese in general, but it's not an unjustified sentiment. The Japanese have done very poorly in addressing its wartime atrocities in China. The Japanese have also elected right-wing politicians who have made moves/comments to insult China. The island dispute and the remarks made by these politicians have been detrimental to Japan's industry in regards to China. China is very important for any company who wants to profit greatly, especially for an automaker of global scale. The Japanese businesses are very interested in China, but their gov't has pretty much ruined it for them. Toyota (and therefore Lexus) would love to tap into the Chinese market at a much larger scale, but they know they have an uphill battle. On the other hand, rivals like BMW have made strides there and I am sure their success in China had greatly contributed to BMW's recent surge of success. The Japanese have really got to fix things with China if they want to remain competitive. Until recently, it seemed that the Japanese gov't was in bed with the Japanese industry, especially in terms of trade with the US. With China, their sentiments could not be any different. The Japanese businesses are desperate to make it in China meanwhile the gov't seems more interested in pissing the Chinese off.
        Felspawn
        • 1 Year Ago
        @ShutoSteve
        yep this guy nailed it on the head.
        Richard
        • 1 Year Ago
        @ShutoSteve
        Majorly agree but also a significant part of it is just the cachet that surrounds owning a German car in China.
        GR
        • 1 Year Ago
        @ShutoSteve
        P.S. ShutoSteve, you seem to have yellow fever.
      Mark Rodriguez
      • 1 Year Ago
      It doesn't surprise me - the brand is still a no-go in the eyes of discerning buyers and the nouveau riche of China are hardly going to cross-shop a lexus for a proper premium brand like Mercedes or BMW. Hell, even the Hyundai Genesis has as much cachet as lexus has in China. This is their way of saying 'We don't stand a chance against the Germans in the world's biggest market despite giving our best for the past 15 years'. Trouble is, you may hoodwink a few gullible buyers out there but not all are so easily fooled into buying what are in fact just rebadged toyotas with zero luxury heritage to speak of. The wealthy Chinese are, quite rightly, ignoring lexuses in favor of the German marques and soon lexus will find itself sandwiched in-between the Germans above them and the hard-charging Koreans coming up from below. My bet is on lexus pulling out of the Chinese market altogether by 2015.
      LW
      • 1 Year Ago
      Lexus lack of success in China is, as indicated, due to the Chinese's grievance from Japan's WWII atrocities. Its not just that Japan refused to acknowledge its past wrongdoings, but due to the cold war that continues to today, it did not have to face its past given that it is too important a strategic alliance for the US to let that get in the way. Look at how the imperialist US tries to scare Japan and Capitalist Korea into being scared of non-occupied Korea so that the imperialist US could have a permanent nuclear presence on those countries' land. The US even tries to make occupied Korea and Japan to be friends to the objection of the occcupied Koreans (not unlike Qatar playing nice to 1srae1 at the intense objection of the Qatari people whom supports the liberation of P41estin4ns). You can see how during the cold war, 0ccupied Germany was a strategic asset to the empire, thus its N4zi past was untouchable (even though 0ccupied Germany admitted to much of it and paid restitution close to a trillion dollar). As soon as the S0viet collapsed, the US did not view 0ccupied Germany as a strategic asset, thus a flood of lawsuit were allowed to go thru and billions and billions of dollars were extorted out of many many german/swiss companies.
        GR
        • 1 Year Ago
        @LW
        LW, You are too paranoid about "imperialist US". The South Korean and Japanese don't like the North Koreans for reasons unrelated to the US. NK has fired rockets into South Korea and often threatens them. They are also in range of Japan and have kidnapped Japanese people with submarines. If you think the US is wary of NK, it's very amplified in SK and Japan. Go hate the US all you want, but make a more accurate argument.
          GR
          • 1 Year Ago
          @GR
          LW, Please make a logical argument, not one of paranoid anti-American sentiments where you rename countries based on their relation to the US foreign policy. "Occupied Korea"? "Occupied Japan"? The only thing occupied is your brain full of nonsensical anti-American gibberish. South Koreans want to reunite with North Korea? Where do you get this nonsense? Seriously, have you even met a South Korean? See how happy they are about being rocketed randomly by the North and then having to deal with NK's occasional tantrums. P.S. Okinawa IS PART of Japan, you dummy. It's like calling Hawaii separate from the rest of the USA. I take it you are a commie troll very frustrated that the world is giving up communism. There are no examples left (as if there was ever) of real communism. NK is more a crazed dictatorship than any form of socialism. China is quickly becoming a better capitalist than the USA. Oh, want to talk about what happened in Russia with communism?
          LW
          • 1 Year Ago
          @GR
          GR, Of course I know plenty of Koreans (whom BTW, has the term Korean laid on them by foreigners. Only non-occupied Korea still use the name of their choosing). The older koreans wants reunification, the younger koreans goes on with their lives. The imperialist US keeps up the scare, but many sees through that and wants the occupier and its military out of its hair. Did you know the prev president of occupied Korea was the equiv of Christi4n Ta1iban that declared war on the Buddhist in his country? Obviously not because America's puppets are all good. Who doesn't know Okinawa has been annexed by Japan, not much different from the forcing the Queen of Hawaii to hand over Hawaii to the empire. Don't play me for a fool, your selective POV from the western propaganda media shows me you know nothing about the region. Did I tell you the lobbing of missiles occur on days significant to the US (in cause you are too dense, Jul 4 2009, May 25 2009, Jul 5 2006, May 30 1993...Independence day & Memorial day, get it?).
      Timothy
      • 1 Year Ago
      The Chinese and Japanese don't like each other so it's just not cool to drive a Japanese car in China. Like Feldspar said below, it's like trying to sell American products in North Korea. Not that they have any money, but they are taught that America is their enemy since the Korean war never really ended. Doubt you'll find many good stories about Japan in the Commie controlled media. They wouldn't even let me write this comment over there without censure.
      miketim1
      • 1 Year Ago
      That shot of the GS on the big screen looks awesome. Love the way the GS looks
      Brodz
      • 1 Year Ago
      China isn't everything. Lexus probably feels that it's too late, and too crowded to go all in now. And if information about China's economy slowing in growth, then they might feel it's not worth risking the money to expand. I say good on Lexus for not scrambling for dollars, like Ford is with Lincoln.
      jonnybimmer
      • 1 Year Ago
      Considering the current animosity the Chinese have against the Japanese, this doesn't surprise me. Better focus on expanding in other markets (Such as Europe) rather than wasting money trying to sell a Japanese car to people who don't want to buy Japanese, especially when Lexus's are asking for the same amount of money as European cars (which the Chinese love).
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