GS69

Lentz on Lexus:
Few Regrets

Hindsight and low gasoline prices have Lexus wishing it had invested in a large 3-row crossover first rather than in its sexy coupes, according to Jim Lentz, Toyota Motor Corp.'s North American CEO.

In an interview with Automotive News at Toyota's temporary headquarters here, Lentz acknowledged that it would have been wiser to resist dealers' calls for an image vehicle like the sporty RC coupe and instead build a rival to the Mercedes GL and Audi Q7.

Such a vehicle would do more to help Lexus hang on to the crucial Gen Y crowd as they begin to have families and shop for a bigger hauler that handles like a car. Lexus' current three-row offerings are the truck-based GX and LX SUVs, while its top-selling RX crossover seats five.

"In hindsight, if I was making this decision 10 years ago, seeing what I see today, the 3-row [crossover] probably would have been the better play to come out first," said Lentz, who has stationed himself at an office in Texas as Toyota prepares to move its headquarters to a new corporate campus here from Southern California.

He added: "Strategically that's a more important vehicle to have than necessarily a lower volume, higher priced image product."

Lexus wouldn't confirm last week whether such a vehicle is under study, but dealers have been clamoring for it. "3rd-row seating is the No. 1 issue we hear from dealers," Lexus division chief Jeff Bracken told Automotive News last year. "We feel like we're missing a 35,000-units-a-year opportunity. We're working hard to rectify that."

Still, Lentz doesn't see the RC as a mistake. The coupe, based on a mashup of the IS and GS sedans and the dated IS C convertible, has sold 4,258 units through the 1st 4 months of the year, outselling Lexus' flagship LS sedan.

Lentz is happy with those numbers, and he's also pleased that the F Sport trim line and high-performance F version of the RC satisfied dealers' calls for something with a little panache without overloading the Lexus lineup with too many low-volume models.

Besides, there has been little cause for regret in Lexus' performance this year. U.S. sales through April are up nearly 17 percent from a year earlier. Lexus now trails 1st-place Mercedes by about 4,300 vehicles and 2nd-place BMW by about 2,400 vehicles. Lexus' newest crossover, the compact NX, shot out of the gate when it was launched last summer and sold 12,532 units in 2015 through April.

Those luxury sales helped fuel the rich North American profits that buoyed Toyota Motor Corp.'s results for the latest fiscal quarter and year. Toyota announced Friday in Japan that North American profits for the 4th quarter ended March 31 were up 72 percent to $735.6 million.

For the fiscal year, Toyota's global operating profit grew 20 percent to a record $22.99 billion, the company said, with North America accounting for more than half the increase. Net income rose 19 percent to a record $18.17 billion, on a 6 percent rise in revenue, to a record $227.66 billion.

With Lexus nipping at the Germans' heels for the luxury sales lead, one might think Lentz would be laser-focused on making a play for No. 1. He's not.

"In the luxury business, chasing volume is not a good strategy," Lentz said, making it clear that Lexus has no plans to follow the Mercedes-Benz CLA and Audi A3 below the $30,000 mark. "Luxury cars cost a certain dollar amount for a reason. I don't want to cheapen my cars just to offer a lease that's $20 a month less."

He's happy with the younger buyers the IS sedan is pulling into the Lexus fold and the conquests the entry-level CT hybrid is reaching.

Lexus will approach adding higher priced models to its lineup carefully, Lentz said. "I think at some point it's not sustainable if you end up with just too many body types in your lineup."

He's determined to use just a handful of high-volume models -- near- and entry-level luxury sedans and near- and entry-level cross-overs -- to cater to about 70% of Lexus shoppers.

"You've got be careful that you satisfy those segments 1st and then understand strategically which other segments are important to you based on the image of the brand."

As for what other new models dealers are asking for in addition to a large 3-row crossover, Lentz doesn't miss a beat: "They want everything."

RNM GS3

LOL
Gotta love Lexus - they bring to market a half assed RC product with old powertrain and a mash up of chassis parts and now tell their customers they were lucky that it was even made.......

How does MB, BMW and Audi afford to make so many sport cars, coupes, convertibles and high perf specialty cars????? Lexus is gotta be doing something wrong imo.

mmarshall

That's because of the enormous effect that the auto press and enthusiasts have on the industry in general. The auto press generally wants sport-oriented vehicles that sometimes are at odds with what the majority of the actual market for new vehicles would dictate.

Simple......the Germans charge an arm and a leg to buy these vehicles.....and two arms and two legs to service them.

EZZ

I really don't get why the IS350 gets so much universal praise while the RC gets bashed so much. They are basically almost the same car...so strange.

GFerg

Low key confirmed a 3 row MB GL-class Audi Q7 competitor will be coming at some point.

pbm317

Exactly.. it's been "coming at some point" for nearly 10+ years now.

spwolf

Did you literally read only a single sentence?

TX is supposed to come out next year... what he was saying was that in the hindsight, he would have released TX before RC.

cino

iTrader: (1)

Why not try to squeeze another row in and make it a 4th row SUV? I mean all I see those 3rd row SUV owners are doing is to ride by themselves.

PhilipMSPT

iTrader: (5)

The GX has been out for over a decade.

LoveCT

Your logic is out to lunch don't you think? Why do you drive a five seater, when you're are the only driver in it? When you don't understand the reasons behind the sales of three rows, why comment on it? The fact that you see one person riding a three row could be because the same vehicle that drives one during a work weekday could serve as the family vehicle during the weekend, no?

LoveCT

Philip, you know jolly well that the GX body on frame is not a proper three row CUV competitor. To see what a good three row luxury model does for your bottom-line, look no further than a QX60. Countless people, like me were/are in the market for three row. Unfortunately for me, I had to go to the Sienna Limited minivan route just two weeks ago as Lexus doesn't have a similar offering. QX60 is not as reliable. Needless to say, I was hoping for a 3 row RX.

Why need a three row? I have answered this multiple times. When you have two small kids, you need to be able to tend to them when your SO is driving, as small kids need constant attention. The mom or the dad can be at the second or third row tending to one or the other and not make constant stop overs for any journey longer than 40 minutes. The Dual Income 2-3 Kids is not a minuscule market, as you non believers make it feel.

DShiekhi

Should Lexus Have Made a 3-Row Crossover Before the RC?



A certain photo thread on the forum makes it clear that a good number of you here love the new Lexus RC. Do you think it's the best model for Lexus to make right now, though?

Read the rest on the ClubLexus.com homepage. >>

jkonquer

I don't know about before or after the RC.
The new RX should be a 7-passenger seater, similar to Toyota Highlander. The GX's and LX's are truck based SUV that's great for off-roading and towing. But they could really use high MPG daily commuter (similar to Acura MDX).

JDR76

I'd like to see a 3 row crossover that's larger than a Highlander or the new RX. Something in more of an Infiniti QX60 size that has a 3rd row that's suitable for adults.

svelt

The RC was badly needed for the brand image as the LFA is beginning to fade in the rear view mirror. Lexus needs to continue following up the design direction and the investments in its "F Sport" imagery that it has started and not completely abandon it like Acura has (and is now paying for it years later). The sportiest coupe it would have had available if the RC was never released was an IS350C FSport and we all know how that's perceived.

That said, if this means Lentz would have rather released a 3 row crossover first while improving upon the RC/RC-F prior to release to really render it as a palpable BMW killer, that I would have been all for.