Lexus' 'letting go' may be a good thing

Sydney

PRIME Minister Narendra Modi's ambitions to turn his country into a powerhouse of high-tech manufacturing via the "Make In India" campaign just received one hell of a boost.

Toyota Motor Corp's Lexus is considering assembling its ES brand there, to take advantage of lower import tariffs on auto parts, the Asahi newspaper reported, citing an unidentified official.

To understand why that is such a coup, it is worth considering the over-the-top quality emphasis with which Toyota has traditionally imbued the Lexus brand.

Its white-gloved plant workers are trained to be able to sense imperfections no wider than a human hair, listen to engine noise with stethoscopes, and tend to be referred to as "craftsmen" or even "master craftsmen". Those of the highest rank, called takumi, are trained for decades and must pass a test involving folding origami cats one-handed before they ascend to the highest plane.

This prissiness has tended to mean that Lexus has frowned on manufacturing in the sorts of countries where you could, say, become a sushi chef with less than 10 years of training.

The marque was around for 25 years before Toyota opened its first production line in the US - and even there, new cars have to be checked against the perfection of a Japanese-made model before they are allowed out of the plant.

The 131,000 Lexus cars sold in China last year attracted import taxes that priced them above rivals Mercedes-Benz, BMW and Audi - but manufacturing locally poses too many risks to the peerless brand, Takashi Yamamoto, executive vice-president of Lexus International told Bloomberg News in 2015. Perhaps in several decades, the world's largest manufacturing economy will evolve to the point where Lexus might dip a toe in, he said.

To be sure, assembly isn't the same thing as full manufacturing. The current proposal centres on knock-down kits - collections of pre-made parts designed for assembly in destination markets that have been a part of the global auto industry for a century.

That would mean a smaller local component to manufacturing, although even with complete knock-downs, elements such as paint tend to be added in the end-market.

Such kits would attract duties of only 30 per cent to 40 per cent, compared to more than 100 per cent for imports of finished cars, the Mumbai-based Economic Times reported last October, after rumours of such an arrangement surfaced.

That price differential could certainly help Lexus compete against the Germans for India's growing middle-class - not to mention Hyundai Motor Co's new Genesis luxury marque, which just pipped Audi for first place in a US reliability ranking by Consumer Reports.

Still, the decision represents a leap for both sides. Despite a concerted push by the government and a strong preference for better vehicles among consumers, India's tin-can-like cars are hardly synonymous with quality.

Of 25 Indian vehicles reviewed by auto-safety group Global NCAP, 18 received a zero-star rating for drivers - a level that's almost unheard of in developed markets. For Toyota to entrust such a precious jewel to a Bangalore production line may be an indication that India's cheap-and-cheerful manufacturing image is finally changing.

Meanwhile, taking even a lesser job like assembly out of the hands of the Japanese takumi is a sign that Lexus has reached a point of acceptance as competitors catch up with it on quality, and is preparing to let its hair down a little.

That's no bad thing.

There's a huge market for prestige vehicles, and Toyota will be limited if it treats every premium car like a Patek Philippe. A less obsessive Lexus might have to downgrade its quest for perfection to Rolex levels - but as luxury goes, that's not a bad place to be.