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Lexus in jeopardy of losing footing in the luxury market

10/15/2007, 9:03 AM

By Drew Johnson

Although Lexus has been the best-selling luxury brand since 2000 — and outsold its nearest competitor by almost 50,000 units in 2006 — the luxury marque could be in jeopardy of losing its market share as soon as 2015, a new report finds. With the majority of Lexus customers being of the baby boom generation, the automaker could be out of position to attract younger buyers in the upcoming years.

“When we look at the luxury market in 10 years, it’s going to change so dramatically,” said former Lexus General Manager Jim Farley in an interview with Automotive News before he moved to Ford. Farley was also responible for the development of Toyota’s Scion brand.

According to Automotive News, Lexus owners are older on average than those of its Japanese and European rivals, except for Jaguar. In fact, the only luxury marques with a higher average age than Lexus buyers are Jaguar, Cadillac and Lincoln.

Perhaps the biggest concern for Lexus is the extremely high average age for its entry-level vehicle. “The ES 350’s average age is 61, and their number-one occupation is retired,” Farley said.

The average age is no doubt a direct reflection of the Lexus product offering. According to industry analysts, other luxury brands — such as Audi and Infiniti — have a lower average age because “they aren’t as strong as Lexus in the upper-range segments.” The Lexus LS is one of the best selling high-end luxury cars on the market.

But within the next decade or so, there will be a demographic shift in the age of those buying luxury cars. Currently, about 23% of luxury car byers are between the ages of 30 and 40. But by 2015, that figure is expected to more than double to 50%, due to younger households earning more that $150,000.

“As boomers retire or pass away, this younger group will be much more representative,” says Milton Pedraza, CEO of the Luxury Institute, a New York market researcher. “They will be the bulk of consumers by 2015, replacing the baby boomers.”

Lexus hopes that the IS and RX will help attract younger buyers. “The ES 350 is not going to attract a 40- or 45-year-old,” analyst Tom Libby told Automotive News. “They need the IS and RX to appeal to younger buyers.” Farley believes the high-perfomance IS-F will get the attention of young buyers who otherwise wouldn’t consider the Lexus brand. “This car is not aimed at anyone buying our cars today,” Farley said at the car’s media introduction. “This car was not supposed to be.”

It remains to be seen if the Lexus IS-F will draw new customers into Lexus dealerships. While the new IS offers more styling and performance than past Lexus offerings, it competes in a segment that includes the BMW 3-series, Audi A4 and Infiniti G35. And, with upcoming cars like the BMW 1-series, Mitsubishi Lancer Evolution X and Subaru Impreza STI, the entry-level luxury/performance market looks to get even tighter and could be the beginning of a slippery slope for Lexus.

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10/15, 9:58 AM

posted by:

Italiafan

I wouldn’t count Lexus out.
One cool model can change everything. They have the money and the braintrust.

10/15, 10:13 AM

posted by:

Rotman

Toyota/Lexus is not a ‘luxury brand.’ Neither is Audi btw. With a couple of excpetions they’re boring reliable cars and have nothing to do with anything luxurious.

10/15, 10:20 AM

posted by:

Fletch

Not impressed with the IS.

10/15, 10:28 AM

posted by:

autonut

Where is big news here? That is why Toyota started Scion brand. Out of college in 2003 would become 30 something in 2015 with a decent income and would graduate through Toyota on his way to Lexus. And by the last count Scion was very successful. Amazing that they are so much ahead of competition in less then 20 years.
BTW, if 70K Lexus is not luxury, is 55K Benz still is? What defines luxury: stuffing or price tag or both?

10/15, 10:34 AM

posted by:

tripleonefive

LOL how do they know what will happen in 2015? Lexus along with Acura and Infiniti will continue to kick ass just like they have been doing
All three mentioned above ARE luxury brands. They will have to offer alternative just like every other auto maker but I see them holding on for years to come
This site is continually trying to beat down Toyota and praise GM I smell a conspiracy

10/15, 10:35 AM

posted by:

atourya

autonut, I think that some people define luxury by the marque of the car. The LS is definitely a luxury car. However, I would also argue that the LS is the ONLY luxury car coming out of Japan.

However Rotman, I think you are wrong. Audi’s 6 and 8 lines are very luxurious.

10/15, 10:37 AM

posted by:

sunshine1810

I don’t think Lexus will be in jeopardy of losing the luxury market. Having said that, I would never buy a Lexus because I hate everything about them. They are ugly, boring to look at and awful to drive.

10/15, 10:58 AM

posted by:

MikeFX

This article is simply pointing out that Lexus does not have any cars that are appealing to younger buyers who would then stay with the brand as they got older. I believe Scion buyers are also skewing older as well, especially for the Xb. The IS-F is not going to do it either. It may build a little street cred, but it will not be a big seller.

BMW has the new 1-series to start a new generation of young buyers. M-B also sexed up the new C-Class, which should draw in some younger buyers. Audi and Infiniti have already have younger buyers due to great design, but Infiniti will eventually lose them as the try to buy bigger than the M35 unless they trot out a new Q.

And as far as luxury btands? Come on people, I think we can all agree that they are: BMW, M-B, Lexus, Infiniti, Audi, Cadillac, Jaguar, Lincoln, Volvo, Land Rover and Acura. None of these companies makes a vehicle decently equipped for less than $30,000 (except maybe the Volvo S40&C30 and the Acura TSX).

10/15, 11:01 AM

posted by:

tripleonefive

Yea Sunshine
The domestics have much better and more reliable cars to drive lol
If Lexus is so boring unattractive and awful to drive why are they the # 1 luxury brand ?
You hate them bc you are mad they outsell and outlast any domestic “luxury” car

10/15, 11:06 AM

posted by:

WEKS

I’d LOVE to hear more of Rotman’s arguments on why Audi and Lexus aren’t luxury brands. Because by the sound of it, he has never driven either.

10/15, 11:11 AM

posted by:

injunraiv

It is possible that LLN is becoming pro-GM. But then again, GMs products have markedly improved and have lots of good stuff in the pipe. So maybe there is no conspiracy, maybe the reality of the market is beyond 1115s grasp.

10/15, 11:13 AM

posted by:

injunraiv

BTW, this is the same thing Cadillac was going through in the 80-90s, and now they’re back, stronger than ever. I wouldn’t say Lexus is dying, but the whims of the marketplace aren’t always so easy to see.

10/15, 11:16 AM

posted by:

LamborghiniZ

Lexus has the money, the R&D, and the technical expertise to figure out what they need to do. Toyota is the largest in the world for a reason, I have no doubts regarding Lexus’ future.

10/15, 11:28 AM

posted by:

autonut

I do sound hypocritical, but Audi does not fit my image of luxury. It took its roots out of DKW and those bodies were manufactured out of plywood in ’30’s. I don’t care what happened later, but plywood and does not fit luxury image at any point. Perhaps it’s me. If luxury is a marque, well, Benz is not it wither. The real luxury marque is Rolls, Bentley, Maybach, Hispano-Suiza and you can add few more based on exclusivity. But as long as we are including Benz flagship and Bimmer flagship into luxury club, I see no reason not to include Lexus, Infinity and maybe Acura (ok, I do like Honda a lot).

10/15, 11:29 AM

posted by:

jinushaun

I always thought the ES was a mistake. It is just a greedy short term manoeuvre by Lexus to grab a butt load of profits from an essentially rebadged Camry. But in the long term, they’re selling to an increasingly older demographic. I also don’t like the new IS. While the performance and design increased, the styling was less aggressive than the previous generation. I initially had high hopes for a more independent Lexus, but the new IS looks like just another boring Toyota.

Toyota ran into this problem, which was why they created Scion. Although I would’ve preferred they save the Toyota brand, creating Scion has worked for them. MB and Cadillac both encountered the same problem and have done well to increase their appeal to a younger demographic. Jaguar has only just now realised this and starting to make the corrections.

10/15, 11:37 AM

posted by:

CTS DRIVER

why does tokyo rose 1115 need to bring up gm in every single comment she makes.

10/15, 11:45 AM

posted by:

55amg

what about Buick. Im sure they have higher average age of owners as well. I think IS and GS models appeal to young people. they look sporty

10/15, 11:46 AM

posted by:

CTS DRIVER

yeah 55amg i see the is350 as sporty and appealing at my young 33 years old.

10/15, 11:49 AM

posted by:

lucklaster

CTS DRIVER :
yeah – I’m wondering if she works in the mail room at toyota.

10/15, 11:58 AM

posted by:

CTS DRIVER

probably does lucklaster, every other person who posts here likes at least 1 car from another region, she has nothing positive to say at all unless its japaneese, and unless she and gm-sales can say they like something else then they have zero credibility.

10/15, 12:02 PM

posted by:

lucklaster

kinda like tastes in music – if not somewhat broad than you are not paying attention.

10/15, 12:06 PM

posted by:

lucklaster

sorry-
then

10/15, 12:11 PM

posted by:

tripleonefive

CTS and Lackluster talking “Lets get together and call 1115 a woman” That will do it lol. Ingenious guys

10/15, 12:20 PM

posted by:

lucklaster

Guys,
to you, miss.

10/15, 12:24 PM

posted by:

lucklaster

and I told you its-
l u c k l a s t e r
Spelling! Please.

10/15, 12:24 PM

posted by:

snork

Forget Lexus, isn’t Toyota even facing the same problem? I believe the average age of Camry buyer is also 50-51+ now too…that’s not far off the 61 yr avg for the ES. I can definitely see Toyota becoming a “Buick” or “Oldsmobile” in the next 10-20 yrs. And no I’m not trying to specifically bash GM brands, it’s just there’s no better example of such a geriatric brand.

10/15, 12:26 PM

posted by:

Kaizen

Why does LLN seem to just copy and paste AutoNews articles?

10/15, 12:28 PM

posted by:

A4

I will take an A8/7/S over an LS any day of the week. Particularly an A8/S8. Sorry they cost a little more, thats the only reason they arent as common as the LS piece of garbage.

10/15, 12:45 PM

posted by:

Deanster

I don’t Lexus has anything to worry about. They’re flush with cash, they’ll figure it out soon enough. I like the IS, I think it’s really well done. Agreed, it’s not as interesting to look at as a nice new A4, but it’s fine.

10/15, 12:45 PM

posted by:

Impulsive

‘Rotman’, you’re an idiot.

’sunshine’, BINGO! … but you have to understand there is a market of sheep willing to buy those attributes at any cost, just like there are sheep willing to buy Chinese cars at this point in time, or knock-off Gucci watches, or equating German engineering to product quality.

‘1115′, just a lot of sheep. Nothing more.

10/15, 12:45 PM

posted by:

Get Real

The people who wrote this article are on drugs or snorting paint.

Lexus = Luxury + Reliability

Mercedes = BMW = Luxury + Oops my warrant is expired time to sell

10/15, 1:12 PM

posted by:

Scarface03

This is probably much ado about nothing. First of all, where are the IS numbers? The competition cited in the article (G34, A4, 3-series) goes up against the IS more than the ES anyway. And where does Lexus think the IS buyers will shop once *they* get older? Maybe and ES or GS, to keep it in the family.

It looks from the article that total sales units are being referenced, and not just sales for the ES. That being said, if the baby boomers start walking past the ES on the Lexus lots as they get older, then won’t the boomers walk past the ES competitors on the competitors’ lots as well? What you would have would be a drop in sales for the ES segment across the board. As long as you have a balanced line, why couldn’t Lexus handle the change… especially if you include Toyota offerings in the mix.

Does anyone else think that the 1-series, Evo, and STi really not belong in this discussion? *Maybe* the 1-series will provide some competition for the IS, but I wouldn’t consider the Evo and STi in the luxury ranks.

10/15, 1:23 PM

posted by:

Driven

Shouldn’t this story have been Lexus, Jag, Lincoln and Caddy will fall on hard times because the average age of their customer. Seems odd this story is just about Lexus when this problem is being faced by many other brands. And the other brands are in worse shape as their average age is even higher than Lexus.

10/15, 1:26 PM

posted by:

atourya

scarface, you are right.. comparing the STi and the Evo to a Lexus doesn’t make any sense.

If I didn’t care about driving dynamics, I would get an ES350. It looks good now, it is extremely reliable, fit/finish is top notch, and it keeps its resale value pretty well.

The problem is that you feel like you are floating, not driving.

10/15, 1:36 PM

posted by:

autonut

Well, reading the collective crapping on Lexus one would think that Lexus in trouble. I actually started to believe in it and re-read the article. Lexus outsold nearest competitors by 50,000 units. If Toyota is making only 5K per unit (they are closer to 10K actually) this would be they collected quarter billion more then the nearest competitor (pessimistic view). Realistic view is closer to half a billion. I wish I had such trouble. Actually I wish such trouble on GM.

10/15, 2:02 PM

posted by:

67_L-88

Perhaps Buick and Lincoln should have been included, but Cadallic has a wide following with the younger crowds these days.

10/15, 4:15 PM

posted by:

Commodore

Deanster – “fine” wont get you anywhere. The Cadillac STS is fine…and look where it is.

Lexus is definately becoming this generation’s Buick

10/15, 5:21 PM

posted by:

jackjimturkey

First, they have to ENTER the luxury market.

Tialiafan: “One cool model can change everything.” So true.

Rotman, true too, though I’d be more careful about throwing around the word “reliable.”

autonut: $70K for a toyota just show’s that P.T. Barnum was right.

tripleonefluffer:
“All three mentioned above ARE luxury brands.” Who besides you believes that?

atourya: The closest thing there’s ever been to a japanese luxury car is either the Mitsubishi Diamante or the Nissan Maxima.

MikeFX: You forgot bentley and its ilk, and included some by mistake

Fluffer: “If L—s is so boring unattractive and awful to drive why are they the # 1 luxury brand.”
Why are the Spurs Super Bowl Champions?

Injunrav: “It is possible that LLN is becoming pro-GM. But then again, GMs products have markedly improved and have lots of good stuff in the pipe. So maybe there is no conspiracy, maybe the reality of the market is beyond 1115s grasp.”

The concept of “bread meat bread” is beyond the Fluffer’s grasp.

Autonut: “But as long as we are including Benz flagship and Bimmer flagship into luxury club, I see no reason not to include L—s, Infinity and maybe A—a (ok, I do like Honda a lot).

Uh, BECAUSE THOSE ARE REBADGED COMMUTER COFFINS, maybe?

junushaun: Scion was a great idea, and has been well excecuted.

snork: i drive an olds, and will soon be in a Buick. I was born in 1969.

a4: I agree

get Real “L–s”= Toyote + “L.”

10/15, 6:48 PM

posted by:

sharpie

Luxury doesn’t mean vague handling and automatice soft suspension. Unfortunately, Toyota/Lexus has gone “mainstream” and uh… soft! A Lexus rides more like a Buick than a BMW.

10/15, 9:20 PM

posted by:

Jacqueline

I’m with the crowd that never really considered Lexus a luxury car on par with Bentley, Rolls, and the like. Actually, to draw a parallel to the fashion industry, Lexus is to a Louis Vuitton logo bag as a Bentley is a Hermes Birkin – they’re both above average but one is on a whole other level.

10/15, 11:03 PM

posted by:

lucklaster

Jacqueline:
Good comment. Many people think that luxury means one thing and it’s their thing.
I never think of Lexus in that way. But Lexus has done a good job of advancing that connection.

10/15, 11:49 PM

posted by:

WEKS

I think anyone who doesn’t think Lexus is luxury brand is a ignorant fool. Remember that Bentley, Rolls and the like are the so called ultra-luxury brands, which reflects in the price. Lexus isn’t as luxurious as them, they aren’t even trying, and neither are Mercedes, BMW and the like.

10/16, 3:22 AM

posted by:

Luca

WHAT IS LUXURY? First of all is a world reknowned brand: name it Jaguar or Ferrari, Tiffany or Cartier, Armani or Gucci, Bulgari or Bentley. Try to ask anyone in Europe if they even know the name Acura or Infiniti…. Those brands aren’t in the radar. Barely the Lexus name, which is heavily advertised, have some recognition only by press.

10/16, 6:57 AM

posted by:

WEKS

You’re wrong, that would be more like the definition of prestige.

10/16, 10:13 AM

posted by:

Rotman

I see I caused some trouble here. First of all I want to point out that the definition of luxury is highly subjective. To me it’s a combination of brand (heritage), performance, status (it still works yes) and quality. I don’t see Lexus as luxurious since they only seem to fit the quality part. Audi doesn’t fit since I see 1000 basic A3’s for every fully loaded A8. Flame away.

10/16, 11:04 AM

posted by:

jackjimturkey

WEKS: By your reasoning, Hyundai could be a luxury brand. Dodge.

Rotman: I think you’re on the ball.

10/16, 11:57 AM

posted by:

CTS DRIVER

Is luxury because of the name or standard features? could a 1984 cadillac with cloth seats be luxury? probably not. could a bmw with fake leather be considered luxury? mabey by name only. the avalon is considered luxury, but the toyota name would SUGGEST otherwise.

10/16, 1:21 PM

posted by:

WEKS

Ahaa, so a fully loaded Toyota Century would not be considered luxury?

10/16, 3:05 PM

posted by:

CTS DRIVER

Weeks i guess that is the question, is it automatically considered luxury because the name or the features?

10/16, 3:19 PM

posted by:

lucklaster

Still, it is in the perception of the beholder.
To some that were born before 1960, let’s say – luxury is from their experience and I might add the world of many classic things. To some that were born after 1980, let’s say, the idea of classic and luxury might be exclusive and more influenced by what the current and young media writers say it is.

10/16, 3:21 PM

posted by:

nagmashot

Lexus is not the best selling luxury brand..only because they are good in the USA does not mean anything..world wide they are only on 4th place.

10/16, 4:08 PM

posted by:

jackjimturkey

I think the Toyota Century is a Limo in japan. I don’t see why that wouldn’t be a luxury car.

CTS: A cadillac Cimmaron is DEFINETELY not a luxury car. It’s an overdressed cavalier. GM’s worst idea ever!

nagmashot: Duh! Shaq isn’t the NFL’s best quarterback.

10/17, 1:55 PM

posted by:

CTS DRIVER

exactly jack i just didnt use the name, a name shouldnt be synonomous with luxury

 
 
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