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Different encounters of three Japanese luxury brands in China

It has been six months since Acura, Honda¡¯s independent luxury brand, hit the Chinese market. Up to early April, however, only 150 Acuras had been sold, one-tenth of the monthly sales of Lexus ¨C Toyota¡¯s luxury brand, which entered China almost three years ago. Meanwhile, Nissan¡¯s Infiniti is gearing up to enter the Chinese market in July, heading for 1,500 units for the first year.


All the above three Japanese luxury brands have scored beautifully in the U.S., yet their experiences in China are poles apart.


Acura in a funk


Due to Acura¡¯s disappointing performance, one of its dealerships offered a deep discount of ¥32,000 ($4,211) for the Acura TL.


Our sales and orders have been quite limited for months. So we are beginning to offer discounts on the Acura TL and RL,¡± A dealer told the reporter. ¡°Up to late March and early April, Acura had sold 150 units in total.¡± The figure was confirmed by the spokesperson of Honda Motor (China) Investment Co., Ltd. Yet Honda (China) didn¡¯t give an explicit explanation to Acura¡¯s poorer-than-expected performance in China.


Meanwhile, Acura¡¯s independent distribution channel has not expanded according to the plan. Early in May last year when the brand was launched in China, Honda (China) announced its plan to open the first five dealerships in late 2006 and mid-2007. The five franchised stores were to be located in Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou. And 10 flagship stores would have been established by July this year. However, only three stores in Beijing, Shenzhen and Nanjing are officially in operation up to mid-May. According to Honda (China)¡¯s chairman Atsuyoshi Hyogo, Acura was supposed to sell 3,000 units from September 2006 to March 2007.


Acura is not a household brand in China yet, and it rushed into the market anyway, (that¡¯s why now it¡¯s stuck in low sales),¡± explained the Acura dealer. ¡°Unlike Lexus, which had been warming up for the Chinese market for years before its official launch, Acura rushed into China without full preparation.¡± When Acura officially hit Chinese market at the end of 2005, Honda (China) abandoned its long-adopted Chinese name ¡°Akula¡± (transliteration of Acura) and renamed it ¡°Ouge¡± (meaning eulogy in Chinese). So far, ¡°Ouge¡± is only popular among Honda¡¯s employees. Ironically, Acura¡¯s Nanjing dealer continued to use ¡°Akula¡± instead of ¡°Ouge¡± in its advertisement in Shanghai.


Lexus on the rise


While the Acura boat is still trapped in the harbor, the Lexus ship has sailed a long way ahead. Toyota has never released the sales volume of Lexus in China, yet custom¡¯s import record of last year points to 12,000 units, doubling that of 2005.


Meanwhile, Lexus¡¯s distribution network has also been expanding. When Lexus first hit the Chinese market in March 2005, it had six dealerships, selling the LS430 RX series, the GS430 and GS300. With an average sales of 700 to 800 units a month, total sales volume in 2005 was estimated at 6,000, ranking fourth in luxury car brands, after Audi, BMW and Mercedes-Benz.


With a good start in 2005, Lexus quickened its pace to boost sales in 2006, adding eight more dealerships with sales hitting 13,000. Statistics released in Lexus¡¯s advertisements showed that 23 Lexus dealerships had been established by May 2007. And its distribution network continues to expand. Lexus¡¯s franchised stores will reportedly reach 30 this year. Even by conservative estimates that each store sells 700 units, Lexus will hopefully sell over 20,000 this year, close to the 22,000 figure of Mercedes-Benz.


Infiniti on the way


Inspired by Lexus¡¯s success, followers are never intimidated by Acura¡¯s setback. Infiniti, Nissan¡¯s luxury brand, finally decided to explore the Chinese market, which has a growing appetite for luxury cars.


Nissan Motor (China) Ltd. officially announced in May the plan to launch Infiniti FX and G35 in China. Infiniti will probably face white-hot competition in the Chinese luxury car market. It remains to be seen if Infiniti will prevail like Lexus or perish like Acura.


The newly appointed director of Nissan (China)¡¯s Import Vehicle Division explained Infiniti¡¯s strategy in a recent interview: focusing on brand-building first instead of sales-boosting.


The G35 will be priced between ¥450,000 and ¥500,000 while the FX25 and FX45 between ¥650,000 and ¥800,000. All the models are developed and produced in Japan. And the director also ruled out the possibility of producing Infiniti in China.

Three Infiniti dealerships will be opened in Beijing, Shanghai, and Shenzhen in July and another seven will come into operation by the end of this year.


Rewritten by Louise Liu based on the authors¡¯ story published in Diyi Caijing Ribao (China Business News)

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