LexFather

To make a long story short this is how things were
-German car priced higher
-Japense car priced lower
-Japanese car offering less, priced lower (Acura)

Today with the Germans entering so many new markets and seemingly offering aggresive pricing in some cases and with the Japanese brands raising prices, is the value/price eroding for Japanese brands? I've noticed in the past the price differences between the Germans and Japanese (Lexus mainly) was 8-10k. Now in many cases its 2k-5k.

A lot of the reasoning for buying Japanese wasn't only for lower pricing but b/c of quality. Well in recent surveys we have seen the German quality get better and in some cases Japanese quality getting worse (Lexus had issues and they seem finally addressed and Acura is at the average and Infiniti has dipped).

If Japanese brand quality is average and the German quality is getting better or on par, what will this mean for Lexus/Inifiniti/Acura?

The new V-6 TSX has been priced to start at 35k! That is IS 350/335 money! Its 40k loaded for FWD, A V-6 with less power and a 5 speed. Where is the value?

I have predicted in past years AUDI will strike. We are seeing their sales rise slowly but surely. Will they become 4th in sales in America?

Lexus seems to have broken the barrier to seem to be WORTH the money even if it costs more or around the same price as the Germans. They will have to really keep quality tops and they are going to have to enroach more on the Germans turf (F models, coupes) as we are talking about. They do offer hybrids but outside the RX and new HS, sales are paltry.

What are your thoughts? Will people just prefer to buy the German car if quality is negligible and price is negligible?

RXSF

I think in the past, buying japanese was like buying a faux Mercedes or BMW. Buying a lexus 20 years ago doesnt mean the same as buying a lexus now. In the past, you would have bought it under the what I like to call "hyundai reasoning." In short, you were buying a reliable car full of technology that rivaled (closely) to the german competitors. And since they throw in a generous price advantage, it was a no brainer to buy japanese. This was the only way people would even consider Lexus (or Acura/Infiniti for that matter). That and the horrible reliability of Mercedes at the time. It was just perfect timing for Lexus.

Fast forward to present day, and Lexus is regarded as a equal (at least in the US) in many senses to Mercedes in terms of prestige and class. Technology is now in direct competition, and the "German engineering" precision can now be surpassed. Therefore, lexus feels that it can charge that same premium that germans have been charging consumers since the beginning, as their cars are now in the same league.

So while lexus prices may be inching closer to Mercedes, it is because they are now treated closely as equals (except in handling ) You are now buying the lexus name plate.

I8ABMR

I think Lexus is letting a little of the reputation go to their heads. In this competitive market they will need to really step it up to stay ahead. German cars have always been admired by many of us because of their performance, handling, and build quality but when they let the reputation goto their heads they lost massive customers. I think for a while Mercedes and BMW had a old GM attitude of " we build they buy it". They thought they would always sell cars based on thier reputation regardless of the poor reliability and sometime mediocre service. The customers flooded the Lexus show roms and lexus blew up. Now Lexus is some cases feels like it could be at the cross roads. Fight for vale or continue to sell on the perception of its quality forever. I think if the Germans will continue to fine tune their vehicles interms of reliability then the price would seem worth it to some of us Japanese buyers. The problem with German cars is that they push the cars to have all of the state of the art technologies that still have some bugs . They are the first to bring much of the new tech to market, but because this technology is in its early stages its problematic and then its easy for the Jpanese to come out with a system a few years later that is reliable and easier to use

IS-SV

To some extent that is happening already, IMO. And the pressure that Lexus, MB, BMW, (and Audi) put on each other today in areas of engines, suspension, technology, quality, reliability, luxury features, styling, service, etc. has forced all of them to respond to these competitors as the price differences narrow.

jracerlmn

I figured that Lexus was always trying to price fix the luxury car market. It's what Nintendo did with games and they got sued for it. A bunch of japanese companies did the same over here in the 80's and 90's as well.

It's a business strategy *shrug*.

mmarshall

We can discuss and argue all kinds of automotive and quality reasons for price disparities, but much of it comes as a result of international currency-fluctuation and the value of the dollar against the German Mark and Japanese Yen. Even if vehicles with German and Japanese nameplates are built here, in American plants, with American labor (as a number are), their pricing in the American market is still set by the corporate buisness managers back in their home countries. They look at a number of things, of course, in setting new-car prices (including projected supply/demand), but a major factor is how the dollar is trading against the Mark/Yen on the world stock exchanges. As we pay for our new cars here, of course, with American dollars, a weak or falling dollar, in relation to the Mark or Yen means that each dollar will be worth less in comparison. So, as it will then take more of them to cover the value of the new car, the price will have to be higher, in American dollars. Conversely, when the dollar rises in value against the Mark or Yen, it takes less of them to cover the prices for new German/Japanese cars here at home. And, of course, the dollar often fluctuates against the Mark and Yen at different rates, so German and Japanese pricing of new cars, in American dollars, will not always take the same trends.

Another factor that is often not taken into account is the very high cost of labor in German plants, among the highest in the world (yes, often more than in UAW plants here at home). The high cost of labor alone, in Germany, has been one of the big factors in the high prices of their vehicles......Audi finally gave up on TT production, for example, in German plants, and moved production of the TT out of the country to Hungary. And, of course, Mercedes already had the comparatively low-cost, non-UAW, ML plant in Alabama.

LexFather

Good post but what do you think consumers will do? The two main selling points of Japanese brands is higher quality, the other is higher value (though Lexus pretty much stands on its own here). If neither is as strong as before will the Germans erode on their territory?

We have Hyundai and the Americans getting better as well.

Will there be a shift in sales soon with the tier 2 brands? I think so.

IS-SV

Which company/"newcomer" will successfully break into Lexus's action and become an equal? Educated guess..............

I8ABMR

These discussions are great. Its interesting to watch the automotive world as it grows and erodes. I am rooting for Lexus but no matter what we the consumer are the ones who will benefit from the intense competiton

Faymester

I don't think it's a German/Japanese choice, I think it's a luxury/sport choice. BMW, while they make a nice car and by all means a luxury car, is really more about sport, performance, & handling where as Lexus is all about the luxury. Benz seems to also be more luxury oriented (but their performance is quite on the performance end with AMG and black and what not).

If you take away price and reliability, then you're basically asking once the customer has decided which type of luxury car they want (more sport or more pamper-your-behind') which badge to they think has the most preistiege, because it seems more people than I thought do shop that way.

mmarshall

I think consumers, to an extent, have already shown what they are going to do. The BMW faithful have pretty much stuck with the brand even through the controversial Chris Bangle years, and the Mercedes faithful have also stuck with their brand through years of poor reliability.

IS-SV

I agree that the Mercedes and BMW loyalists are significant, as well as the Lexus repeat buyers too. Many of us have owned all of the 3 brands. But often premium car buyers don't venture from these 3 brands in large numbers, other than some purchases of Infiniti, Jag and Audi cars.

TwiBlueG35

What you are saying is right in terms of the increasing price of Japanese cars and improving reliability of German ones, but the performance gap between the two are withering as well. If you compare a Benz C-class and a Lexus IS, there is no apparent performance advantage from the C-class, and they are priced abreast of each other.

The G Man

The Japanese are now facing the same labor cost as the Germans and the US, the days of a cheap Japanese luxury car is gone, leave that to Hyundai in the coming years. So I guess the question now is, what is the edge for the Japanese car makers in the future. Reliability will not be a edge for much longer as the market demand more and more electronics from the Japanese auto makers. Value is no longer an edge and they are still behind in performance.

MPLexus301

iTrader: (3)

To be fair, the IS350 blows the C350 out of the water in terms of performance and also efficiency. Many C350 owners have been complaining of relatively bad gas mileage, while it's not uncommon to see IS350 owners here averaging high teens or low 20mpgs, with upper 20s and even 30s on the highway.

C300 is more powerful than the IS 250, but I don't know how they compare in terms of performance or efficiency.