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Lexus, which still has a high popularity due to price increases at home, recently launched a new ES model on the overseas Indian market, with a starting price of 5.19 million rupees (about 509000 yuan) overseas, which is not much different from that at home. The new car is assembled by Toyota's new local production line in Bidadi Bengaluru, meaning India has become a new producer of Lexus and is exported overseas.

Although the new ES model is produced locally in India, the starting price of the ES300h model is more than 500,000 yuan, which is even higher than the price increase of the domestic ES300h model. Some people may think that there is not much difference between the price and the import price.

In fact, the Indian market is different from the domestic market. In Toyota's view, because competitors have set up local assembly lines, Lexus imports will be levied high import taxes if they do not set up local assembly lines. This puts the company at a disadvantage.

It is understood that since 2017, India has announced that it will impose an additional consumption tax on luxury cars, and the local market will impose an additional goods and services tax rate of 28% on luxury cars. As the tariff on imported models has doubled, the tariff on imported cars in India has exceeded 100%. In order to reduce tariffs, consider building a local factory. If the factory is built in India, the tax rate on Indian Lexus is about 30% and 40%.

As a result, Lexus has set up its third Lexus manufacturing base in India after Japan and North America, which is just an assembly plant. There are currently six models sold in India, with prices ranging from 5.19 million rupees to 22.32 million rupees, and all imported products are taxed at more than 100 percent.

Affected by India's high consumption tax rate, import tax and registration tax, in addition to Lexus, there are Mercedes-Benz, BMW, Audi and other car companies to set up factories there for sales. Although many luxury brands have set up factories to sell in India, the market performance has not been high. Among them, Lexus sold only 500-600 cars in India in 2019, accounting for a tiny market share of 1-2%.

In fact, it has always been a hot topic to realize the production of Lexus in China. Dazhuren, executive deputy general manager of Lexus China, once said that there are many factors to consider to achieve domestic production, not that Lexus does not want to be domestically produced, but that Lexus does not need domestic production for the time being.

As a relatively young luxury brand in China, the sales volume of Lexus in the Chinese market is not large, and it will not consider building a factory in China until the sales volume gradually increases and stabilizes to the need of domestic production, because to realize localization, it is equivalent to the Chinese market that needs to digest all the production capacity of the factory. Once there are relatively great changes in the market, it will pose a greater challenge to the balance of supply and demand of the factory, not only to the factory. As well as the employees in the factory, their families and so on are all responsible.

As the models of Lexus Japanese factories not only supply the Chinese market, but also produce vehicles for other countries and regions of the world, the relationship between supply and demand is very balanced. If sales decline in one region and grow in another region, it will not have much impact on the production capacity of Japanese factories. Lexus relies on a stable sales system in the North American market, and it has been listed in North America for 25 years before opening a second factory. At present, Lexus needs to think more about how to increase Lexus sales in the Chinese market than localization.

According to Lexus sales data, cumulative sales in China reached 200521 in 2019, up 25 per cent from a year earlier, while Lexus ranked third in the luxury market after BMW and Mercedes-Benz, with cumulative sales of 298114 vehicles in 2019, down 0.1 per cent from a year earlier.

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