Lexus: Quake will end luxury sales leadership
Mark Rechtin
Automotive News | April 25, 2011 - 12:01 am EST


NEW YORK -- Lexus' chief says looming earthquake-related inventory shortages almost certainly will end the brand's decade-long run as the top-selling luxury brand in the United States.

Lexus dealers will begin to feel shortages of cars this week, and definitely in May, as a result of the March 11 Japan earthquake.

Mark Templin, general manager of Lexus Division, said dealers have a tight 30-day inventory across all model lines. Some models, such as the recently launched CT 200h compact hybrid hatchback, are nearly sold out.

"It's a frustrating experience," Templin said last week at the New York auto show.

The earthquake stopped production of various parts in Japan, crimping assembly schedules. Last year, No. 2 Mercedes trailed Lexus by less than 5,000 units in the United States.

Lexus is acting to retain customers, such as allowing customers to extend their concluded leases by two six-month terms. Given the high lease traffic from three years ago, a record number of Lexus customers are coming off lease this summer.

Templin said many Lexus customers are buying out their leases because the shortage of used cars means the value of off-lease cars is often more than their residual value.

Templin warned dealers against taking advantage of the situation.

"Our dealers can't go gouging customers. Just because there are a limited number of cars, we are not plywood salesmen when the hurricane comes. How do you explain to a customer coming off lease that now we are raising your payment substantially? That's not the way we do business," he said.

Despite the shortage of cars, Lexus will forge ahead with its May and June advertising schedule, which have many brand-oriented commercials. However, the regional dealer groups, which typically traffic in deal-based advertising, have been told to shut down their efforts.

Longer term, Lexus likely may not be the best-selling luxury brand ever again, as Mercedes-Benz and BMW move further down-market to hit fuel economy targets.

"It's being driven by regulations, not demand. It won't be that long before some [luxury brand] is selling 500,000 cars a year," Templin said.

"If we do that, we have to grow our dealer network, or ask our current dealers to expand even more, and I don't want to do either," Templin said.

"If you are in the business to grow volume for volume's sake, you stop being special. That's not what we are about."

"Our dealers can't go gouging customers. Just because there are a limited number of cars, we are not plywood salesmen when the hurricane comes. How do you explain to a customer coming off lease that now we are raising your payment substantially? That's not the way we do business," he said.