Toyota bets made-in-Japan Lexus can drive sales

Fri Jul 6, 2012 5:25am EDT
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By Yoko Kubota

MIYAWAKA, Japan (Reuters) - Toyota Motor on Friday launched production of its revamped Lexus ES sedan, a flagship luxury car that represents a renewed bet the automaker can keep building cars for the United States and China at more costly factories in Japan.

Toyota, Japan's top automaker, has made it a goal to safeguard production of some 3 million vehicles a year in its home market - roughly triple the equivalent output at Nissan Motor and Honda Motor and about 40 percent of the cars and trucks Toyota builds globally.

Lexus is key to that commitment. The only Lexus model made outside Japan is the RX sport-utility vehicle manufactured in Ontario, Canada.

Japanese automakers, including Toyota, have been reeling from a strong yen that has eroded profits on exports. The Lexus strategy leaves the brand more exposed to foreign exchange than Toyota's mainline brand, but Toyota officials said the made-in-Japan strategy would pay off even at current yen levels.

"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," said Kazuo Ohara, executive vice president of Lexus International.

"Our policy is to protect manufacturing in Japan as much as possible for as long as possible," Ohara said.

Audi, Mercedes-Benz and BMW already make cars in China, where imported luxury vehicles face tariffs of 25 percent. Nissan plans to start building Infiniti vehicles in China from 2014.

"At some point Toyota may have to move production abroad to compete on the cost front," said Masatoshi Nishimoto, the manager of Japan and Korea vehicle forecast at IHS Automotive.   Continued...

Visitors are reflected in a logo of a Toyota Motor's Lexus car at a showroom in Tokyo July 4, 2010. REUTERS/Issei Kato