The luxury division of Toyota, Lexus is likely to be the next big ambassadors of Prime Minister's Make-In-India campaign. The Japanese automaker, Toyota Motor Corp launched its Lexus brand in India in 2017 and now a report on Asahi newspaper in Japan suggests that the company is now looking to locally assemble its ES brand in India, citing sources. The company recently appointed Toyota's loyal, N. Raja as the Chairman of Lexus India and the company has been very aggressive with its India operations, building its portfolio in India and marketing them to the right audience. Luxury automakers like BMW, Mercedes-Benz and Audi have been assembling in India much before Modi's Make-In-India marketing campaign started and recently Volvo Cars have also started local assembly of its Volvo XC90 SUV and will soon roll-out other products too.
Lexus products are known to have high precision manufacturing and top-notch car designs, as a matter of fact, its designers are often referred to as "craftsmen" or even "master craftsmen." The highest rank -- known as takumi -- are trained for decades and have to undergo rigorous training and pass test involve folding origami cats with one hand before progressing further. With Lexus cars being build here, we will have to wait and see if the top Japanese manufacturing is carried over here. India is a powerful auto-manufacturing hub without a doubt but advanced high-level of car designs like in Lexus to be replicated here as it is despite only being assembled will still be a challenge for the company.
For instance, Lexus was present for over 25 years in America before Toyota opened its first production line for Lexus models, and reports also suggest that new cars rolling out of its Lexington plant are checked against the perfection of a Japanese-made model before dispatching them to showrooms. Toyota began the production of its Lexus ES models in America only in 2015.
Lexus sales in India, when compared to its global sales, is a drop in the ocean. The company sold over 1.31 lakh cars in China in 2017 despite being more expensive than its German rival by attracting import taxes. Earlier in 2015, in an interview to Bloomberg, Takashi Yamamoto, Executive Vice President of Lexus International had said that manufacturing locally poses too many risks to the brand. "Perhaps in several decades the world's largest manufacturing economy will evolve to the point where Lexus might dip a toe in," he added.
Like its German rivals, Lexus will be locally assembling its products which means it will be importing vehicles' body kits and it will just be assembling it which will help Lexus India to avoid CBU import taxes. This also means that the majority of the parts will come from Japan and a small percentage of locally sourced components, although even with complete knock-downs some elements such as paint tend to be added in the final market. CKD kits currently attract about 30-40 per cent import duty as against 110 per cent duty of CBU units allowing the locally assembled cars to be more cheaper and take on other luxury carmakers.
Lexus is one of the last luxury car brands to enter India and ever since its India entry it has already launched two sedans and three SUVs in India. Nissan's Infiniti and Hyundai's Genesis are other luxury brands yet to enter India. Elevation of N.Raja as the Chairman of Lexus India is another indication that Lexus is indeed planning to go big in India and his expertise and wide experience with Toyota will certainly help the brand to grow stronger in one the fastest developing automobile market in India.
Inputs from Bloomberg