Lexus losing ground in US
How critical can successful supply chain management be for a company?
Just ask Lexus, as the luxury carmaker is about to lose its grip in the United States as the top luxury automaker. Lexus, part of Toyota Motor Corp, expects to lose its leading market share to German competitors BMW and Mercedes-Benz.
Lexus, which makes all but one model in Japan, barely held the title as the United States’ market leader in luxury auto sales last year, holding on by 9,216 cars. Lexus has seen its disrupted supply chain limit production to 50 percent.
Through April, U.S. tallies show both BMW (71,417) and Mercedes-Benz (71,388) well ahead of Lexus’ U.S. output (64,932). BMW and Mercedes-Benz are taking advantage of Lexus’ slip in the United States market by increasing production.
Eric Noble, president of The Car Lab, had some interesting insight when talking with Bloomberg during the week.
“The house was on fire at Lexus before the earthquake hit,” he said. “If the current situation wakes then up to that, then some good may come from it.”
The Lexus image took a hit last year, when more than 10 million Toyota-brand vehicles were recalled for problems related to the gas pedal. Because of that hit to its brand, Lexus’ lead over BMW as the leading U.S. luxury automaker dipped 52 percent in 2010.
The U.S. luxury auto market is particularly important for Lexus, as the Toyota carmaker hasn’t had much luck catching on in other areas. Lexus’ market share in Europe is a paltry 0.2 percent, with the brand struggling to catch on in China as well.
Audi, Mercedes-Benz and BMW each sold over a million cars worldwide in 2010. Lexus sold less than half a million, coming in at 410,000.
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”