Lexus Says No To Chinese Manufacturing On Quality Grounds Photo:
Kez Casey | Nov, 06 2015 | 6 Comments

Despite huge import tariffs that put imported vehicles at a disadvantage in the Chinese market, Lexus has declared that it won’t be producing cars there anytime soon, owing to questions over the quality of Chinese manufacture .

Luxury competitors, Mercedes-Benz, BMW, and Audi have all established joint-venture production facilities with Chinese auto makers, to cater to what is seen as a pivotal market globally.

The majority of Lexus production currently occurs at one of six factories in Japan, with two North American facilities for North American delivered RX and ES (shown at top of article) models.

In a recent interview with Bloomberg, a Lexus senior executive indicated that production would remain in Japan to ensure that production quality would be maintained.

That’s despite a pricing chasm that sees imported Lexus vehicles priced some 30-percent higher than equivalent vehicles built within China.

Executive vice president of Lexus, Takashi Yamamoto, commented that there was “...too much quality risk in China to produce there.”

While Lexus is unsure of China’s production ability, industry analyst J.D. Power’s 2015 China Initial Quality Study shows that quality is improving.

Measuring quality on 'reported problems per 100 vehicles', J.D. Power’s results showed an industry average of 105 problems per 100 vehicles in China, compared with 112 problems per 100 vehicles in the US.

Lexus fears quality won't match vehicles sourced from more experience car building markets
Lexus fears quality won't match vehicles sourced from more experience car building markets

The rankings also split problems between Chinese domestic brands, at 120 problems per 100 vehicles, and international brands, including international joint ventures, at a below average 98 problems per 100 vehicles.

Despite the Chinese industry’s rapid quality turnaround, Yamamoto thought it might be several decades before Lexus established a production point in China.

By 'sticking to its knitting' with its existing production facilities, Lexus is saved the high cost of the investment that would be needed to establish Chinese facilities.

While European brands have enjoyed massive growth in China in recent years, the slowing Chinese economy has put the brakes on vehicle sales over the last few months.

The forecasts for the Chinese economy indicate it may fall to its lowest point in almost two decades, dragging sales of automobiles and consumer goods down with it.

Manufacturers that rely heavily on the Chinese market have been forced to reduce output, and have seen share prices drop in line with falling profit forecasts in China.

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