by ZHOU Shuqi

While China's imported passenger-car market continued to contract in 2025, Lexus moved against the trend as most global automakers retrenched.

Lexus sold about 180,000 vehicles in China last year, accounting for nearly one-third of the import market, even as overall import sales fell by almost 30% in the first 11 months, according to data provided by LI Yanwei, an expert at the China Automobile Dealers Association. Lexus' market share rose by about six percentage points year on year, making it the only major imported luxury brand to record growth.

The figures point to a shift in the role of imported cars in the world's largest auto market. Once a high-margin segment catering to China's wealthiest buyers, imports have been hit by weaker sentiment and changing spending priorities, while local brands — particularly in new energy vehicles — have moved rapidly upmarket.

Auto industry analyst MEI Songlin told Jiemian News that the advance of local brands has narrowed the technology and perception gap with foreign rivals, weakening the brand premium traditionally enjoyed by imported luxury cars.

Most global luxury carmakers have responded by scaling back imports. Mercedes-Benz and BMW have localized their high-volume models, leaving imports to serve niche or image-led demand. Jiemian News has previously reported that Volkswagen Group China also reduced its import-car operations as part of a broader efficiency drive.

Lexus stands apart in continuing to operate in China as a fully imported brand, making imports the core of its local business rather than a supplement to domestic production.

Its performance has been driven by supply discipline rather than expansion. By tightly controlling production allocations and dealer growth during the boom years, Lexus avoided the inventory build-ups that later forced competitors into heavy discounting. As demand weakened, rivals were pushed into price wars to defend volumes, while Lexus largely avoided that pressure.

A key pillar of its strategy is the ES sedan. Positioned in the 200,000-yuan-plus midsize-to-large sedan segment — one of the few import categories that still offers meaningful scale — the ES has been on sale in China for nearly two decades. As the current generation, launched in 2018, entered the late stage of its lifecycle, Lexus increased incentives.

Dealers in Guangdong told Jiemian News that discounts on a model with an official starting price of about 300,000 yuan reached roughly 100,000 yuan.

Insurance registration data — a proxy for actual deliveries — show ES sales reached 118,700 units in 2025, up 6% year on year and accounting for more than 60% of Lexus' China sales.

Unlike many rivals, the price cuts were not driven by inventory pressure. Pricing was broadly consistent across regions, dealers said, with no clearance push. A Guangzhou Lexus salesperson said most vehicles were shipped from Japan only after orders were placed.

These practices point to a centrally enforced operating model rather than short-term tactical discounting. Satoru Aoyama, a senior Asia-Pacific corporate ratings director at Fitch Ratings, said the approach reflects long-standing operational discipline at Lexus' headquarters.

Stable dealer networks have also supported sales and pricing. Consulting firm LandRoads said Lexus' retail network remained largely unchanged between 2023 and 2025, while Mercedes-Benz, BMW and Audi experienced dealer contraction and turnover.

Lexus has also benefited from stronger residual values. Data from the China Automobile Dealers Association show Lexus' value-retention rate ranks second only to Porsche and was the only foreign luxury brand to record a slight increase in three-year retention last year.

Consolidation among Japanese premium brands has further strengthened Lexus' position. With INFINITI and Acura having exited China after prolonged struggles, Lexus is now the only Japanese luxury brand operating at scale. Li said Japanese-brand customers tend to priorities reliability and long-term ownership costs, with upgrade demand increasingly flowing to Lexus.

Challenges remain. Demand for luxury internal-combustion vehicles continues to soften, import-related taxes weigh on costs, and policy support for new-energy vehicles has intensified competition as domestic EV brands move rapidly upmarket.

Aoyama said these pressures were accelerating the localization of Japanese brands across research and development, procurement and manufacturing, as they sought to better meet consumer demand, protect margins and improve efficiency.

In 2024, Toyota Motor Corporation, the parent company of Lexus, announced plans to establish a wholly owned Lexus electric vehicle and battery research, development and manufacturing company in Shanghai's Jinshan district. Production is expected to begin in 2027 with initial annual capacity of about 100,000 units, marking Lexus' first localization push in the electric era.

Some analysts say the timeline risks missing a key growth window. Aoyama said the strategy remains viable if Lexus can deliver China-tailored software and user experience, competitive localized costs and faster model updates, adding that local production need not dilute brand premium as high-end EV buyers increasingly focus on technology rather than country of manufacture.