Lexus May Use Toyota's Existing Production Facilities In India For CKD Operations

As India is poised to become the third-largest market for auto sales, many global behemoths are beefing up their assembly operations by switching away from CBU to CKD route. Close on the heels of Swedish luxury carmaker Volvo Cars announcing its plans to assemble cars in India, another Luxury carmaker Lexus is believed to be exploring feasibility to assemble some of its product lines at its parent company Toyota’s existing production facilities at Bengaluru. Incidentally, the assembly operations will be in a similar state. Even though Lexus has not officially confirmed it, it is widely believed that LX, RX and ES are some of the models that will be assembled here thus enjoying the favourable duty structure for locally made products. At present, all the models are imported as a CBU from Japan and attract more than 100 per cent import duty.

Sources aware of the development told BW Businessworld, “Somewhat similar to what Volvo did recently, Lexus is keen to make use of Toyota’s existing infrastructure at Bangalore. Apart from a dedicated assembly line for Lexus SUVs and sedans, there is a likelihood of joint sourcing of certain aggregates and components from Toyota’s existing vendor base in and around the city.” He requested anonymity as he is not authorized to speak to the media.

It was reported earlier that Japanese auto major Toyota’s luxury brand Lexus entered India with the launch of three models priced up to Rs. 1.09 crore (ex-showroom). The company introduced the RX Hybrid model priced at Rs. 1.07 crore, RX F Sport hybrid at Rs. 1.09 crore and ES 300h hybrid sedan priced at Rs. 55.27 lakh (all prices ex-showroom). The company also unveiled its top end SUV LX450d, but didn’t announce price along with the fifth generation Lexus LS which would be available for sales from next year. Currently, they are competing with some of the most premium models sold under the stable of Mercedes, BMW, Audi, Volvo and Jaguar Land Rover.

Another sources on condition of anonymity stated, “Though it is not decided which specific models will be following this route, there is a huge probability that existing models will initially hit the production lines. There are chances that hybrid variants will also be assembled where Camry Hybrid is being built.”

When Lexus India Senior Vice President Akitoshi Takemura was queried on email, he stated, “
Local production requires significant investment and we consider two factors. First, stable regulation and government policies, and second, volumes need to justify the investment. For now, we are focused on establishing the foundation on which we can deliver the exceptional Lexus brand experience to the Indian consumers. While we can’t comment specifically on future plans at this moment, we will reiterate the importance of the Indian market to Lexus in the global context. We are committed to growth in India in a sustainable manner.”

When Narayan Raja, Senior Vice President and Director of Marketing & Sales at Toyota Kirloskar Motor Private Limited stated, “These are strategic level decisions and therefore we are not in a position to comment anything in this regard. We are not averse to sharing our production facilities with Toyota. But this is a query that should be raised to Lexus because it would be completely their call.”

Puneet Gupta, South Asia Manager-Vehicle Sales Forecast, IHS Markit, said, “If the speculation is true, then I think it’s a win-win situation for both the brands as this way Toyota will be able to retain their customers and Lexus gets an opportunity to establish them in India by taking advantage of the wide base of Toyota customers especially who have been buying Fortuner (SUVs). Toyota has a big asset of wealthy customers and now is the time to reap fruits of the efforts which Toyota has been putting for so many years in India. Due to support from Toyota, Lexus may get a big leap with respect to German trio Audi, BMW, Mercedes Benz in terms of sales. However, I think we are yet to see acceptability of India consumers for a Japanese brand like Lexus in India.”