Toyota launched its Lexus luxury division in the U.S. 19 years ago and the brand has seen tremendous success ever since. Lexus has been the best-selling luxury marque in the U.S. since 2000 and is largely considered the benchmark for automotive quality. But the Lexus brand isn’t seeing the same level of success in its home market of Japan.
Lexus got a late start in the Japanese market — Toyota launched the Lexus brand just three years ago in its home market — but the luxury marque hasn’t gotten the traction that Toyota originally thought it would, with sales off by about 40 percent. Germany’s luxury offerings are partly to blame for Lexus’ slow sales, but Toyota itself deserves some of the blame.
When Lexus launched in Japan in 2005, it offered three models: the Gs sedan, IS sedan and SC hardtop convertible. The problem with those offerings was that they had all been offered in Japan under the Toyota nameplate, all for about 20 percent less than the Lexus-badged versions. And because of the product overlap, Lexus had trouble converting Mercedes and BMW buyers. According to BusinessWeek, about 80 percent of initial Lexus buyers were former Toyota owners, while only 5 percent made the switch from Mercedes and BMW cars.
Another issue facing Lexus is that it is actually viewed as too Japanese — partly due to its Toyota overlap. German brands — such as Mercedes-Benz , BMW and Audi — are seen as unique, aided by the fact that the majority of the German cars are left-hand drive in a right-hand drive-dominate Japanese market.
But Toyota — which has a 45 percent market share in Japan — isn’t giving up on the Japanese luxury car market. Lexus has invested $1.6 billion in its dealer network and is expanding its vehicle lineup. Lexus launched its flagship LS sedan in the Japanese market in September of 2006 — which now makes up about half of all Lexus sales — and will launch its RX SUV in 2009.
