35 Years of Success for Lexus in Canada Amidst Turbulent Times

Lexus marks 35 years in Canada, having grown from 22 dealerships to 40 with over 450,000 vehicles sold. As the largest auto manufacturer in Canada, Toyota absorbs added costs from tariffs and plans to increase prices on its vehicles in the near future, with no plans to shift production to the U.S. or lay off Canadian employees. The company expects price increases to happen before March 2026.

Lexus, the luxury division of Toyota Motor Corporation, is celebrating 35 years of presence in Canada, having expanded from 22 dealerships to 40. Over the past three decades, Lexus has sold over 450,000 vehicles in the Canadian market. Despite the challenges posed by recent tariffs, Lexus remains committed to Canada, with no plans to shift production to the U.S. or lay off Canadian employees.

The Canadian automotive sector has been significantly impacted by the ongoing trade disputes between Canada and the U.S. [1]. In August 2024, U.S. President Donald Trump increased baseline tariffs on Canadian goods not complying with the USMCA from 25% to 35% [1]. This increase has led to higher costs and potential layoffs for Canadian automotive manufacturers, including those in the luxury vehicle segment like Lexus.

Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers' Association (CVMA), has noted that most Canadian vehicle production is 50% to 60% U.S. content, making the effective tariff around 10% to 12.5% [1]. This tariff, combined with retaliatory tariffs from Canada, has put pressure on manufacturers to absorb these costs.

Lexus, as the largest auto manufacturer in Canada, has decided to pass these added costs onto consumers. The company expects to increase prices on its vehicles before March 2026. This price increase is a strategic move to maintain profitability amidst the rising tariffs and the potential for higher used-vehicle demand due to increased new-vehicle prices.

The Ontario government has been proactive in supporting the automotive sector, calling on the federal government to take aggressive action against U.S. tariffs. Ontario Premier Doug Ford has advocated for a 50% tariff on U.S. steel and aluminum to support Canadian automakers [1]. This move aims to encourage domestic purchases of these inputs and mitigate the impact of U.S. tariffs.

Despite the challenges, Lexus remains optimistic about its future in Canada. The company’s commitment to the Canadian market is a testament to its long-term strategy and the significant market potential it sees. The ongoing trade talks between Canada and the U.S. are crucial, and a mutually beneficial agreement could help roll back the tariffs and stabilize the automotive sector [1].

References:
[1] https://www.wardsauto.com/automakers/canadian-auto-sector-takes-aim-at-tariffs
[2] https://www.ofimagazine.com/news/trump-announces-new-round-of-tariffs