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Lexus passes on Japan free-trade discount

Absorbing: Prices for the new Lexus NX have already been set according to the tariff-free price regime that is expected to come into force under the Japan-Australia free-trade agreement next year.

New Lexus NX compact SUV becomes first model to benefit from upcoming tariff cut

27 Oct 2014

LUXURY car importer Lexus has already started factoring in the removal of the five per cent import tariff on Japanese-made motor vehicles as Australia's proposed free-trade agreement (FTA) with Japan draws closer.

Lexus Australia chief executive Sean Hanley told GoAuto that the the pricing of the company's new NX compact SUV that goes on sale this week from $55,000 (plus on-road costs) had already been discounted by an amount equivalent to the import tariff.

Mr Hanley said he expected the FTA to kick in about February or March next year.

Rather than reduce pricing of the NX range at that time, Lexus was absorbing the tariff cost for now, he said.

“We do have price movement coming in the form of a free-trade agreement,” he said.

“We are reviewing our pricing strategies and our positioning now and how we will pass the benefit of that on, whether it be price or price and spec or whatever.

“Remembering that the free-trade agreement is based on landed cost, not retail price.

“So I can tell you that with the NX we are launching here, we have absorbed the FTA benefit already, so that won't change in March or February.

“In terms of the rest of our range, once we understand completely how, when and where it takes effect we will determine whether we pass that on in price, price and spec or otherwise.

“It would be our intention to pass the benefit on to the consumer in some way.”

An FTA with Japan is set to bring Japanese importers into line with companies bringing in goods from Thailand and the United States where FTAs have existed for several years.

It will also give Lexus an advantage over its mainly European rivals which will continue to have to pay the tariff for now.

Newcomer to the luxury market, Hyundai, will also have to pay the tariff on its new Genesis luxury flagship that is being launched in Australia next week, at least until a similar FTA with South Korea is locked down.

Mr Hanley said regardless of the FTA, Lexus would not get into the discount car business.

“Our direction is that we will bring good quality cars at a compelling price, but we will not sacrifice customer service and our luxury status to get there,” he said.

The new NX – the first compact SUV in the Lexus range – is priced between $55,000 and $75,000.

At this stage, only the hybrid 300h variant is being offered, in three specification levels – Luxury, F Sport and Sport Luxury – but a more affordable four-cylinder turbo petrol model, 200t, will be added to the range about February next year, just in time to take advantage of the Japan-Australia FTA.

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