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Toyota Said to Reveal Plans to Begin Making Lexus in U.S.

Toyota Said to Reveal Plans to Begin Production of Lexus in U.S.
A worker cleans a Toyota Motor Corp. Lexus vehicle displayed at the company's booth during the LA Auto Show in Los Angeles on Nov. 29, 2012. The world’s largest automaker is preparing to start production of Lexus cars in the U.S. for the first time. Photographer: Jonathan Alcorn/Bloomberg

Toyota Motor Corp., the world’s largest automaker, is preparing to start production of Lexus cars in the U.S. for the first time, two company officials said.

Chief Executive Officer Akio Toyoda is scheduled to disclose in New York today that Toyota plans to produce the Lexus ES in the U.S., the people said, asking not to be identified because the announcement hasn’t been made public. Production is scheduled to begin in 2015, one of the people said. The company said yesterday it would make a production announcement, though it didn’t specify which model or where.

Lexus, a major source of profit for Toyota, was dethroned by Bayerische Motoren Werke AG’s BMW and Daimler AG’s Mercedes-Benz as the U.S. luxury sales leader in 2011 after 11 years as No. 1. Toyota is looking to revamp Lexus, making its models more like performance cars and less like family cars, as it competes with the German companies.

Toyota will produce Lexus models at the Georgetown, Kentucky, factory, Kyodo reported, citing no one. The New York Times reported that Toyoda will probably unveil production plans for the Lexus ES, citing a person with knowledge of the matter.

The company is being offered as much as $146.5 million by Kentucky to expand a plant in the state that’s Toyota’s largest in North America.

Most ES sales are “in the U.S. -- it’s not really a big seller in Japan,” said Koji Endo, an analyst with Advanced Research Japan, who estimates Lexus currently contributes about 20 percent of Toyota’s global profits. “Moving it there makes sense.”

Steve Curtis, a New York-based Toyota spokesman, declined to discuss details of today’s announcement.

Kentucky Incentives

The Kentucky Economic Development Finance Authority approved an incentive package yesterday, based on Toyota enlarging its auto-assembly factory in Georgetown by 2015 to produce an additional model. Toyota is considering increasing the Georgetown capacity by 50,000 units annually starting in 2015, according to a statement by the agency.

Toyota, based in Toyota City, Japan, would have to invest $531.2 million and add 570 full-time jobs to receive the full value of the credits, the agency said in an e-mailed statement. The Kentucky agency didn’t specify the model. Kentucky Governor Steve Beshear has scheduled an economic development announcement for 9:30 a.m. New York time at the Georgetown plant according to an e-mailed statement. That’s the same time as Toyota’s event in New York.

The ES shares underpinnings with Camry and Avalon sedans now built in Georgetown. It would be just the second Lexus to be assembled in North America, joining the Canadian-built RX sport-utility vehicle.

Lexus ‘Role’

The company has revamped the Lexus GS, ES, LS and IS sedans in the past 18 months, to help fuel global sales as demand rises for luxury models in China, Southeast Asia, Latin America and Russia. Increased sales for Lexus, with its higher prices and profit margins than mass-market Toyota models, also help the company expand earnings as sales of cheaper cars increase, Endo said.

“Globally, the real volume increases are coming from India, China, Brazil, but with cars that sell for under $10,000,” he said. “They have to have these higher margin products, and that’s the role of Lexus.”

Lexus isn’t going to reclaim its No. 1 U.S. luxury ranking, which it held in the U.S. from 2000 through 2010, anytime soon. Toyota has said it expects to sell at least 260,000 Lexus cars and trucks this year, up 6.5 percent from a year ago and the most since 2008. Deliveries for the brand grew 16 percent in the first quarter to 56,740.

Kentucky Plant

Still, that pace isn’t enough to move the brand from third place in U.S. luxury sales. BMW and Mercedes say this year they’ll exceed their 2012 totals of 281,460 and 274,134, respectively. Those figures exclude Daimler’s cargo vans and Smart cars and BMW’s Mini brand, all outside the luxury category.

The Georgetown plant, opened in 1988, is the main production site of Camry sedans, the best-selling U.S. car for the past 11 years.

Toyota has invested $6 billion at the site, according to its website, and the factory employs about 6,600 people and can build more than 500,000 vehicles and 600,000 engines annually. The new project could add 750 jobs when contract workers are included, according to the Kentucky statement.

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