An interesting Lexus article from The Detroit News
09-09-07, 02:33 PM
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An interesting Lexus article from The Detroit News
Lexus aims to conquer globe with luxury sales
Toyota hopes to take the brand's U.S. success international while keeping true to its premium roots.
by Christine Tierney
When Toyota Motor Corp. shipped the first Lexus cars to California in 1989, most Americans were underwhelmed by what looked like made-in-Japan versions of Mercedes-Benz sedans.
"Back when it started, there were a lot of questions whether Lexus would work or not," said Dave Illingworth, a senior vice president at Toyota who was in charge of Lexus when the brand was introduced.
Within 11 years, Lexus' emphasis on delivering reliable cars and pampering customers turned it into the best-selling luxury nameplate in the United States. Now Toyota hopes to repeat that success around the world and transform the premium brand conceived for the U.S. market into a global luxury nameplate to rival the leading German marques Mercedes and BMW, whose global sales are roughly twice that of Lexus.
Toyota has invested billions to expand and refine Lexus' lineup of cars and SUVs. Its engineers and designers are injecting more glamour and power each time a model comes due for redesign.
Most industry experts are betting that Toyota will succeed in establishing Lexus among the top marques. "They have that very good combination of advanced technology, excellent build quality and they're getting better on design," said Jack Nerad, editorial director at Kelley Blue Book.
But so far, the results of its global push are mixed.
In some of the most promising, fast-growing markets such as Russia and China, Lexus is off to a roaring start.
But it has been slow to gain traction in key regions, including its home market, Japan, where the brand sputtered after a grand introduction two years ago. Lexus missed its sales targets in Japan in 2005 and 2006, and demand is only now picking up after the rollout of a redesigned flagship LS sedan.
The biggest challenge, however, is Western Europe, the world's No. 1 luxury car market and home of the oldest premium marques. Last year, Lexus sold fewer than 37,000 vehicles in Europe -- a market comparable in size with the United States, where Lexus sold 322,000 cars and crossovers.
"It's not that easy to export the Lexus concept," Michael Ganal, BMW's sales chief, said in an interview earlier this year. "Lexus is made for the United States."
Americans prize comfort, reliability and attentive service -- the hallmarks of the Lexus brand. The Japanese revere heritage. Europeans want innovation above all, says Christoph Stürmer, Frankfurt, Germany-based auto analyst for Global Insight and co-author of the book 'Premium Power' about the German luxury car industry.
That poses a dilemma for top executives at Toyota's Aichi headquarters in Japan and at its U.S. sales operations in California: Should Lexus be adapted to each region or do they strive to refine one global identity for the brand?
Yuki Funo, a member of Toyota's board and the automaker's top manager in North America, said he believes Lexus should have one global identity.
"If we apply a lot of localization, we may be able to increase volumes faster, but that's not the right approach," he said in an interview. "We have to maintain the identity of the brand. That's different from Toyota, which should be localized. Lexus should be global."
One brand, many nations
In its effort to make Lexus an international brand, Toyota is refining the styling and handling of Lexus vehicles to appeal more to people who like European cars without startling its large and loyal American clientele.
Its designers and engineers ratcheted up the glamour in the latest GS and IS sedans.
When it came time to redesign the staid LS flagship, they turned out a bigger and sleeker technology-packed sedan aimed squarely at the top-line German sedans -- the BMW 7 Series and the Mercedes S-Class. The LS boasts the first eight-speed automatic transmission in a passenger car and offers a hybrid option in that exclusive segment for the first time.
While engineers in Japan are developing new Lexus vehicles, U.S. sales executives are dispatching managers to other countries to help launch the brand. They're also inviting Lexus executives and dealers from other countries to California to show them "what's the secret sauce," said Jim Farley, head of Lexus and group vice president of Toyota Motor Sales USA in Torrance, Calif.
In June, dealer Alexey Tereschenko toured the plush Newport Lexus store.
The southern California dealership is halfway around the world from his outlets in Moscow, but it captures the Russians' extravagant notion of luxury, with its pale wood furniture, decorative waterfall and classical music emanating from a player piano. "Like a five-star hotel," said Tereschenko, who owns three Lexus stores in Moscow and is opening a fourth. Lexus sold around 10,000 cars and trucks in Russia last year.
Tereschenko was also impressed by the service. "There are many things we'll implement," he said, such as offering loaner cars to customers who bring vehicles in for repairs.
When Lexus was introduced in Russia five years ago, newly affluent customers were thrilled to get their hands on a nice car and weren't fussy about service. But rich Russians are increasingly demanding, Tereschenko said. "They want to be treated like VIPs."
Lexus sales are growing even faster in China, where demand for premium cars is outpacing the booming market as a whole.
There, too, service is important. "Consumers in the luxury market are extremely wealthy," said Tony Mueller, a U.S. sales manager who came to China last year to help with the Lexus launch. "They can be even more demanding here."
In luxury's birthplace
In Western Europe, the kind of service that appeals to the new millionaires in Russia and China might make customers uneasy.
"Europeans like to be left alone," said Farley, who worked in Europe for Toyota in the late 1990s. "They don't want sales people pushing a product on them."
European luxury car buyers also have different expectations of their vehicles.
In the United States, people buy cars because they have to. "It's the only way for them to buy milk, or beer, or to get to the kindergarten," says Stürmer.
But in Western Europe, public transportation is good and gas can cost twice as much as it does in the United States. "A car in Europe tends to be more of a luxury good. People buy cars because they like them," he said.
They appreciate innovations and advanced technology, and they tend to be more forgiving than Americans of glitches that accompany breakthroughs.
Lexus' approach to technology reflects the preferences of its first customers -- Americans who prize reliability and don't want to spend hours studying manuals.
"We don't want to make things too complicated," Farley said. "Lexus delivers technology that doesn't require effort on the part of the customer, such as self-parking, touch-screen navigation, automatic collision prevention systems and hybrid drive."
In Europe, hybrids are turning out to be Lexus's big advantage.
European manufacturers initially dismissed hybrids as being more costly and complicated than their fuel-efficient diesel models. But 80 percent of Lexus RX customers in Western Europe opt for a hybrid powertrain.
At the Frankfurt motor show opening to the media on Tuesday, Germans will be displaying their own hybrids, including diesel-electric models.
Rough road at home
In Japan, Lexus got off to a bumpy start. That was partly a matter of timing: The market has been sliding since August 2005, when Lexus was launched. But after missing its initial sales targets, Lexus is closing the gap with Mercedes and BMW in Japan.
Through May, Mercedes sales fell from 20,464 vehicles to 17,796. BMW sales dipped to 17,570 from 18,874, while Lexus sales surged to 16,035 from 9,608. "The LS is clearly a very big part of the volumes," said auto analyst Andrew Phillips at Nikko Citigroup in Tokyo.
Indeed, Lexus would be ahead if it had the same lineup in Japan that it has in other countries. But many of its upscale models are sold under the Toyota brand. For instance, the RX is known in Japan as the Toyota Harrier. Phillips expects Lexus to grow as the automaker transfers more Toyota vehicles to its premium brand.
"They have a heritage there that's different than what they bring to new markets," Nerad said, "that being the heritage of the Toyota corporation."
http://www.detnews.com/apps/pbcs.dll...709080353/1148
Toyota hopes to take the brand's U.S. success international while keeping true to its premium roots.
by Christine Tierney
When Toyota Motor Corp. shipped the first Lexus cars to California in 1989, most Americans were underwhelmed by what looked like made-in-Japan versions of Mercedes-Benz sedans.
"Back when it started, there were a lot of questions whether Lexus would work or not," said Dave Illingworth, a senior vice president at Toyota who was in charge of Lexus when the brand was introduced.
Within 11 years, Lexus' emphasis on delivering reliable cars and pampering customers turned it into the best-selling luxury nameplate in the United States. Now Toyota hopes to repeat that success around the world and transform the premium brand conceived for the U.S. market into a global luxury nameplate to rival the leading German marques Mercedes and BMW, whose global sales are roughly twice that of Lexus.
Toyota has invested billions to expand and refine Lexus' lineup of cars and SUVs. Its engineers and designers are injecting more glamour and power each time a model comes due for redesign.
Most industry experts are betting that Toyota will succeed in establishing Lexus among the top marques. "They have that very good combination of advanced technology, excellent build quality and they're getting better on design," said Jack Nerad, editorial director at Kelley Blue Book.
But so far, the results of its global push are mixed.
In some of the most promising, fast-growing markets such as Russia and China, Lexus is off to a roaring start.
But it has been slow to gain traction in key regions, including its home market, Japan, where the brand sputtered after a grand introduction two years ago. Lexus missed its sales targets in Japan in 2005 and 2006, and demand is only now picking up after the rollout of a redesigned flagship LS sedan.
The biggest challenge, however, is Western Europe, the world's No. 1 luxury car market and home of the oldest premium marques. Last year, Lexus sold fewer than 37,000 vehicles in Europe -- a market comparable in size with the United States, where Lexus sold 322,000 cars and crossovers.
"It's not that easy to export the Lexus concept," Michael Ganal, BMW's sales chief, said in an interview earlier this year. "Lexus is made for the United States."
Americans prize comfort, reliability and attentive service -- the hallmarks of the Lexus brand. The Japanese revere heritage. Europeans want innovation above all, says Christoph Stürmer, Frankfurt, Germany-based auto analyst for Global Insight and co-author of the book 'Premium Power' about the German luxury car industry.
That poses a dilemma for top executives at Toyota's Aichi headquarters in Japan and at its U.S. sales operations in California: Should Lexus be adapted to each region or do they strive to refine one global identity for the brand?
Yuki Funo, a member of Toyota's board and the automaker's top manager in North America, said he believes Lexus should have one global identity.
"If we apply a lot of localization, we may be able to increase volumes faster, but that's not the right approach," he said in an interview. "We have to maintain the identity of the brand. That's different from Toyota, which should be localized. Lexus should be global."
One brand, many nations
In its effort to make Lexus an international brand, Toyota is refining the styling and handling of Lexus vehicles to appeal more to people who like European cars without startling its large and loyal American clientele.
Its designers and engineers ratcheted up the glamour in the latest GS and IS sedans.
When it came time to redesign the staid LS flagship, they turned out a bigger and sleeker technology-packed sedan aimed squarely at the top-line German sedans -- the BMW 7 Series and the Mercedes S-Class. The LS boasts the first eight-speed automatic transmission in a passenger car and offers a hybrid option in that exclusive segment for the first time.
While engineers in Japan are developing new Lexus vehicles, U.S. sales executives are dispatching managers to other countries to help launch the brand. They're also inviting Lexus executives and dealers from other countries to California to show them "what's the secret sauce," said Jim Farley, head of Lexus and group vice president of Toyota Motor Sales USA in Torrance, Calif.
In June, dealer Alexey Tereschenko toured the plush Newport Lexus store.
The southern California dealership is halfway around the world from his outlets in Moscow, but it captures the Russians' extravagant notion of luxury, with its pale wood furniture, decorative waterfall and classical music emanating from a player piano. "Like a five-star hotel," said Tereschenko, who owns three Lexus stores in Moscow and is opening a fourth. Lexus sold around 10,000 cars and trucks in Russia last year.
Tereschenko was also impressed by the service. "There are many things we'll implement," he said, such as offering loaner cars to customers who bring vehicles in for repairs.
When Lexus was introduced in Russia five years ago, newly affluent customers were thrilled to get their hands on a nice car and weren't fussy about service. But rich Russians are increasingly demanding, Tereschenko said. "They want to be treated like VIPs."
Lexus sales are growing even faster in China, where demand for premium cars is outpacing the booming market as a whole.
There, too, service is important. "Consumers in the luxury market are extremely wealthy," said Tony Mueller, a U.S. sales manager who came to China last year to help with the Lexus launch. "They can be even more demanding here."
In luxury's birthplace
In Western Europe, the kind of service that appeals to the new millionaires in Russia and China might make customers uneasy.
"Europeans like to be left alone," said Farley, who worked in Europe for Toyota in the late 1990s. "They don't want sales people pushing a product on them."
European luxury car buyers also have different expectations of their vehicles.
In the United States, people buy cars because they have to. "It's the only way for them to buy milk, or beer, or to get to the kindergarten," says Stürmer.
But in Western Europe, public transportation is good and gas can cost twice as much as it does in the United States. "A car in Europe tends to be more of a luxury good. People buy cars because they like them," he said.
They appreciate innovations and advanced technology, and they tend to be more forgiving than Americans of glitches that accompany breakthroughs.
Lexus' approach to technology reflects the preferences of its first customers -- Americans who prize reliability and don't want to spend hours studying manuals.
"We don't want to make things too complicated," Farley said. "Lexus delivers technology that doesn't require effort on the part of the customer, such as self-parking, touch-screen navigation, automatic collision prevention systems and hybrid drive."
In Europe, hybrids are turning out to be Lexus's big advantage.
European manufacturers initially dismissed hybrids as being more costly and complicated than their fuel-efficient diesel models. But 80 percent of Lexus RX customers in Western Europe opt for a hybrid powertrain.
At the Frankfurt motor show opening to the media on Tuesday, Germans will be displaying their own hybrids, including diesel-electric models.
Rough road at home
In Japan, Lexus got off to a bumpy start. That was partly a matter of timing: The market has been sliding since August 2005, when Lexus was launched. But after missing its initial sales targets, Lexus is closing the gap with Mercedes and BMW in Japan.
Through May, Mercedes sales fell from 20,464 vehicles to 17,796. BMW sales dipped to 17,570 from 18,874, while Lexus sales surged to 16,035 from 9,608. "The LS is clearly a very big part of the volumes," said auto analyst Andrew Phillips at Nikko Citigroup in Tokyo.
Indeed, Lexus would be ahead if it had the same lineup in Japan that it has in other countries. But many of its upscale models are sold under the Toyota brand. For instance, the RX is known in Japan as the Toyota Harrier. Phillips expects Lexus to grow as the automaker transfers more Toyota vehicles to its premium brand.
"They have a heritage there that's different than what they bring to new markets," Nerad said, "that being the heritage of the Toyota corporation."
http://www.detnews.com/apps/pbcs.dll...709080353/1148
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