WCA July 2013

Michael Dunne, an automotive consultant specialising in Asia, shared his views with the Times . “SUVs were definitely uncool to drive here,” he told Mr Bradsher at the Shanghai show. “Now something is changing. They’re cool.” Brisk sales in the American market of the midsize Lexus luxury sedan lead to Toyota’s latest US expansion With luxury cars as much in demand by American buyers as by their Chinese counterparts, Toyota on 19 th April announced that it would build its Lexus ES 359 for the first time in the United States. Toyota said that it would invest $360 million to install a new production line at Georgetown, Kentucky, that will build about 50,000 of the flagship sedans a year. The Lexus ES is selling twice as fast as it did in 2012. The expansion will increase annual production at the plant, which already assembles the Japanese car maker’s Camry, Avalon and Venza models and employs about 6,600 people, to about 550,000 vehicles a year. Toyota is also investing $170 million in upgrades to the plant. As reported by Hiroko Tabuchi in the International Herald Tribune , the factory, which opened in 1986, was Toyota’s first wholly owned site in the US and is its largest manufacturing plant outside of Japan. In a broadcast of the Lexus announcement streamed live from Georgetown, Gov Steven L Beshear said that residents of his state actually view Toyota as a Kentucky company. Akio Toyoda, president of Toyota Motor, voiced similar sentiments. “For manufacturing, Kentucky is Toyota’s home,” Mr Toyoda said in New York. “It has some of the most experienced engineers in the world.” Ms Tabuchi, who is based in Tokyo, noted that Toyota has been eager to bolster the Lexus brand in the United States, its biggest overseas market, where luxury car sales now outpace sales of other autos. The Kentucky expansion underscores how foreign automakers are seeking to capitalise on robust car sales in the US after years of painful cutbacks by domestic companies. (“Toyota Expansion Reflects a Push for US Lexus Sales,” 19 th April). Toyota also wants, Ms Tabuchi wrote, “to shift more production from Japan to overseas markets to better insulate itself from the currency gyrations that have wreaked havoc on its bottom line in recent years.” ❖ ❖ Toyota’s chief executive for North America, James E Lentz, told the Herald Tribune that the Kentucky investment came on top of $2 billion in investments to expand and upgrade Toyota factories in Indiana, Mississippi, West Virginia and Canada. Over the past two years those expansions have also created new jobs. Traditionally tightly controlled from its headquarters in Toyota City, Toyota has revamped its management structure in recent months to give more authority to regional managers. These include a new team of executives in North America led by Mr Lentz, who told Ms Tabuchi that bringing Lexus production to the United States was the first decision made by his team, and that he expected similar decisions to follow. Dorothy Fabian – Features Editor

The swiftness of the auto industry’s response to changing Chinese preferences may be gathered from the plans of the three biggest US automakers: General Motors, Chrysler, and Ford. As reported by Mr Bradsher: ❖ ❖ General Motors announced that it would introduce nine new or restyled SUV models in China over the next five years, and disclosed that it would build four more factories and add 6,000 jobs to accommodate its ever-rising sales there; Bob Socia, president of GM China, which has for years been neck-and-neck with Germany’s Volkswagen as Chinese market leader, said that his company’s focus is on luxury vehicles and SUV’s. “Not long ago, both were considered niche segments,” Mr Socia told the Times . “Both are now mainstream and growing rapidly.” ❖ ❖ A Chrysler executive said that the company would start making Jeep Cherokees in Changsha in southern China by the end of next year. John Burton is the general manager of the Fiat and Chrysler joint venture with the Guangzhou Automobile Group. With its factories barely able to keep up with demand in China, he declined to speculate on when or even whether the company might export Jeeps. “Potentially we could,” Mr Burton said at the show in Shanghai. “But if the Chinese market sucks them up then they’ll stay here.” ❖ ❖ For its part, Ford was promoting its Lincoln brand, which it is bringing to China. Having opened one assembly plant in Chongqing last year, Ford is building another assembly plant, an engine factory, and a transmission factory in Chongqing, and assembly plants in Hangzhou and Nanchang. Jim Farley, Ford’s executive vice president for global marketing, sales and service – and of the Lincoln brand – said that midsize cars are not only the largest market segment in China: they now bulk larger than the entire auto market in Japan, or the combined auto markets of Germany and Britain. ❖ ❖ The shift toward bigger cars and SUVs is prompting concern in Beijing, where air pollution is so severe as to threaten a wave of emigration. Policy makers there are weighing whether to follow the example of the Obama administration in the US and the European Union in tightening gas mileage regulations. “The most important discussion around this area is the changing fuel-economy requirements,” Ford’s Mr Farley said in Shanghai. ❖ ❖ Stricter rules could hurt sales of the largest models, but automakers have been getting ready by offering many cars and SUVs with slightly smaller engines than are in use in the United States. And, Mr Bradsher noted, suburban and rural retreats from polluted cities in China have become fashionable. Additionally, tens of millions of Chinese travelling overseas are becoming aware of the international popularity of higher-riding vehicles.

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Wire & Cable ASIA – July/August 2013