Lexus, the luxury brand that is leading the transformation of Toyota's electrification, hopes to seek a new path in China, using high retention rates as a breakthrough point to shape Lexus' new brand label in the electrification era.
Today's electric vehicle market in China is very competitive.
Chinese brands continue to roll out new heights of electric car configurations, with color TVs, refrigerators, and massage chairs all being moved onto cars.
On the other hand, Tesla's drastic price reduction, the market price war should rise. Many used car dealers earned a wave of blood loss.
The market even appeared "buy electric car is better than renting a car" argument. Many brands of electric cars have a one-year warranty of only 70%, and a three-year warranty is a direct cut.
Especially in the current macroeconomic environment, many high-net-worth people are no longer concerned about the taste, but pay more attention to asset preservation and appreciation.
Therefore, the low residual value of used cars is a pain point for users that cannot be bypassed in the electrification era.
The emergence of the new Lexus pure electric SUV, the RZ, attempts to break this situation.
The new RZ was officially launched on February 14, priced at RMB 369,900 - 459,900. In addition to the competitive price, Lexus has proposed a "Used Car High Warranty Commitment" policy in the pure electric market.
Customers who purchase the new RZ can enjoy a residual value guarantee of up to 90% for one year and a four-year warranty rate of 60% when replacing a Lexus branded model.
Such a hard-core policy has actually broken through the ceiling of the industry's warranty rate, making the warranty rate no longer a concern for consumers when purchasing electric vehicles.
For Lexus, this determination to resist the temptation of price wars and the strength to give residual value guarantees has also further enhanced its brand value in the Chinese market.
Why is the electric car warranty not working?
Why is the value retention rate of electric cars so low?
First of all, battery degradation is the biggest problem.
Especially for early electric car products, the charging and discharging of lithium batteries is done by the movement of lithium atoms between positive and negative poles. Every time the lithium atoms complete a charge/discharge cycle, i.e., after a full charge/discharge, the electrode structure will change, and this change will lead to a decline in battery performance over time. This is the battery decay.
The main manifestation is that the battery charge is not enough, resulting in a decrease in range.
In addition, due to battery degradation resulting in a decrease in battery performance, the charging time will also become longer. For example, before we only need half an hour to charge from 20% to 80%, now it takes an hour, and the power falls off especially fast and not durable.
Second, for vehicles that need to replace the battery, the price is ridiculously high.
CPSR surveyed 20 representative mainstream new energy models to reflect the overall price fluctuations of domestic new energy vehicle power battery pack aftermarket accessories.
The average value of the power battery pack single-part part ratio for the 20 new energy sample models was 49.19%, meaning that consumers need to spend nearly half of the market price of the vehicle to replace the battery pack.
Third, the price system is not stable enough, but also troubled the price of used electric vehicles.
On the one hand, the price of electric cars as a whole has fallen faster in previous years due to advances in battery technology. The Tesla Model 3 needed more than 700,000 yuan at the earliest, and after it was domestically produced, its price dropped to more than 300,000 yuan, and as capacity climbed, it kept dropping to 220,000 yuan today. This has led to many used car dealers not daring to accept electric cars.
Finally, the imperfect testing and evaluation system of electric vehicles also plagues the value retention rate of electric vehicles. In particular, battery testing requires professional equipment and tools, which are not freely available to used car dealers. This also leads to the degree of decay of electric vehicle power battery is not very good assessment.
RZ Residual Value Guarantee, what has changed
The Lexus RZ's high residual value guarantee policy has arguably overturned the old pattern.
Previously, there were some manufacturers who introduced EV warranty policies, but without technology and brand support, relying solely on manufacturers to subsidize residual values is not a long-term solution.
The bottom line for Lexus to be able to launch a residual value guarantee policy comes first from its battery technology.
At the beginning of the development of the new RZ, a goal was set to maintain 90% of the battery capacity after 10 years, inhibiting battery aging in terms of materials, battery pack construction, and control systems.
Moreover, Lexus is using Panasonic batteries. Although Ningde Times occupies the title of the world's largest battery manufacturer by virtue of its shipments. But in overseas markets, Tesla still has to rely on Panasonic's battery supply. This also fully demonstrates the technical strength of Panasonic batteries.
Another factor that is closely related to the residual value is the stability of the new car price system.
Lexus has always been a stickler for value, and the pricing of the new RZ can be said to be a step below even the hybrid model of the new generation RX. This also ensures that the price of the new RZ will not fluctuate greatly, at least for a certain period of time.
At the same time, the official high warranty buyback program is conducive to the testing of the battery decay aspect of the vehicle, and the recycling of raw materials in the battery is the next step for many car companies.
Of course, the brand credibility and reputation of Lexus is also the bottom line of its high residual value guarantee.
Brand Evolution, Lexus Finds Electric Label
After the promotion of former Lexus International President Tsuneharu Sato to the position of Toyota President, Lexus will become the leader of Toyota's electrification transformation.
In the face of such pressure, Li Hui, as Lexus China's manipulator, certainly knew the importance of sales. However, he did not take any aggressive price measures, but adopted a more long-term but incremental approach to brand value by differentiated marketing and seizing the breakthrough point of the low retention rate of electric vehicles.
This approach does not necessarily have immediate results, but it is the persistence of Li Hui, a long-termist.
Since the former executive vice president of GAC Toyota arrived in Lexus China in 2020, it has been in time for a three-year epidemic.
The epidemic and chip shortage became a problem for almost all car companies, and in the first half of 2022, Toyota also announced several production line shutdowns and production reductions, including the production line at the Japanese plant that produces several Lexus models. However, the pace of Lexus' electrification transformation has not been suspended at all.
Dating back to 2017, Lexus began a brand upgrade in hopes of creating a unique luxury lifestyle.
In 2020, the Lexus brand's first electric vehicle, the UX300e, was launched, an electric SUV that laid the foundation for Lexus to explore the pure electric market.
2021 Lexus' first PHEV model, the NX, is launched, and Lexus' product matrix containing multiple power options provides a guarantee for its electrification transformation.
In 2022, Akio Toyoda personally released the BEV show, demonstrating his determination to move into electrification, and the Lexus brand became the pioneering force in the electrification of Toyota vehicles.
At the beginning of 2023, the RX/RZ is relaunched, bringing not only new products and driving methods, but also the promise of high warranty value, which will become another brand unique label established by the Lexus brand in the Chinese market.
Li Hui has been advocating that Lexus' electrification and China market strategy should adhere to some basic principles.
One, electrification maintains the simultaneous development of multiple technology routes and fully understands the true demands and acceptance of customers in terms of intelligence.
Second, work with dealers to ensure reasonable profits and earnings so that it is possible to provide continuous quality service to more customers. Insist on quality development is the responsible attitude to the brand and consumers.
Third, to make the oil-electric switch a "war of ascension", and to show a truly different Lexus through technological revolution and brand rejuvenation.
Fourth, all efforts will be focused on focusing on and studying the changes in user needs, especially the demands of young consumers for electrification, in order to prepare for a truly grand strategic transformation.
The high residual value guarantee for RZ users is a key decision made by Li Hui in the interest of users.
If the 4-year, 100,000-kilometer and 6-year, 150,000-kilometer free warranty and free maintenance policies are the first brand labels Lexus has established in the Chinese market, Li Hui's "High Residual Value Guarantee" at the launch of the new RX and RZ may lead to a new chapter of Lexus' brand appeal: not only reliable quality and service, but also asset preservation, which is the most important concern of customers. In addition to reliable quality and service, there is also the preservation of asset value, which is the main concern of users.
Users who have experienced early electric vehicles are now entering the replacement or additional purchase period, and they are not reluctant to buy electric vehicles, and they have understood what a good electric vehicle is through long-term use.
As the brand that most respects "hospitality", Lexus has eliminated customers' concerns about the residual value of used cars at the beginning of the purchase of a new car by means of a "high warranty buyback", which is a demonstration of Lexus' unique sincerity in the electrification era. This is a demonstration of Lexus' unique sincerity in the electrification era. In addition, it is an invisible upgrade of Lexus' brand value in the electrification era.
