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Toyota’s Lexus brand under-performing in home market

03/23/2008, 1:13 PM

By Drew Johnson

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.

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03/23, 1:20 PM

posted by:

A4

Who are these people that consider Lexus the pinnacle of luxury automobiles? Maybe the pinnacle of luxury appliances, but thats a whole other category.

03/23, 1:26 PM

posted by:

Zo0M 6 Zo0M

There’s one thing to learn here. You maybe can fool the United States in buying re badged overpriced Toyotas, but you cant fool the Japanese who are amongst the smartest people in the world when it comes to technology and such to buy the same Toyota vehicle for thousands more. All of the German offerings are one car and one car only around the world, there is no rebadging involved. If you buy a BMW 535i it is not a Mini (_________) or a Rolls Royce _________. Unlike Toyota where you have a Toyota Avalon which is pretty much the Lexus ES series.

03/23, 1:38 PM

posted by:

jjayc08

Zoom 6 zoom- Most of those vehicles aren’t offered here as Toyota’s. We get upgrade Camry’s and such, but they’ve had vehicles such as the Toyota Crown (Lexus GS), Lexus LS (Toyota Celsior), Lexus RX (Toyota Harrier) and Lexus IS (Toyota Altezza, but I’ll have to check back on that one as I’m not sure if it’s sold in Japan) that are the exact same thing, not a lower scale version or a different styled version, for a couple of years. The Toyota Avalon isn’t pretty much the Lexus ES- you can run it up to about the same price range for maybe a few more features, but you’ll find they have some major differences if you sit in one.

Pause and just imagine if Chevrolet rebadged one of their cars, with almost no differences, as a Cadillac. It’s happened, and we know what the results are.

03/23, 1:58 PM

posted by:

johnnycanuck

And none of Toyota’s high priced marketing gurus had even the slightest inkling this could happen before the decision was made? It is their home market after all. ZoOm 6 is absolutely correct: this speaks volumes about the North American psyche where status is everything and just how easy it is to get the masses to believe they’re getting something more when they’re really not. It also says a lot about how Americanized Toyota has become, although it is nice to see their arrogance backfire from time to time.

03/23, 2:02 PM

posted by:

autonut

jjayc08 is right.
I am sure people with money would like to purchase luxury from Lexus in Japan, but they cant do it any more or better then from Toyota. Most of Japanese families changes car every 2 years. The law requires that after 2 years dealer provide overhaul for which consumer MUST pay. The salesman comes to the house (you don’t have to go to a dealer) and arranges exchange: dealer picks up 2 year old car and delivers a new one. If anyone wants to complain about CAFE or NHTSA: please entertain me. The described process applies to all cars: 600cc micros and 4.3L Crown.

03/23, 2:05 PM

posted by:

autonut

johnnycanuck, I am not sure if Toyota americanized or trying to defend its turf in Japan. Selling there is very difficult, more so then in US, I think. Lexus formula worked in US and working in Europe so far, that is why they tried it at home and failing. They are not failing because of quality or perception associated with a car, they are failing because service level in Japan is very high for ANY car.

03/23, 2:18 PM

posted by:

Impulsive

It’s not only the Lexus brand that is overpriced and fooling most people into spending more for marginal improvements … the German crap is no different … but anyone can rationalize spending more on their want to falsely satisfy their need.

03/23, 2:48 PM

posted by:

autonut

It is not improvements that are offered by luxury: it is service. When Volvo was truly Volvo I did not need to go to dealer for maintenance and service. I left car outside, someone picked up car before we got up and left a loaner and in the evening, loaner was gone and my wagon was deposited into the driveway. It is immature to assume that people with money don’t know what to do with their money (Britney and Paris are not part of this argument).

03/23, 3:04 PM

posted by:

Kaizen

RIght, customer service is as equal to the product as far as luxury items. A lot of luxury brands have yet to figure that out. Some companies refuse to buyback cars like Jag and Range Rover unless their forced by an arbitrator. And they refuse to offer goodwill at dealerships. Then they wonder why their retention is so low.

As far as JDM Lexus sales, part of the problem is the idea of paying more for the exact same model and the exact same level of service (although last generation) and having to pay more just for the brand name. I guarantee that you’ll see the prices come down for next-gen models. Either way, with a 45% market share, I doubt Toyota is too worried.

03/23, 3:17 PM

posted by:

SD650irag

autonut is right on. lexus provides a value-added service, emphasis on the service. consumers who demand consistently great service typicall have a higher disposable income therefore favor higher margin vehicles. hands down, lexus is quite a remarkable success story in the US!

03/23, 3:51 PM

posted by:

RicardoHead

autonut stop being such a sycophant. How can anyone who doesn’t believe in gravity or evolotion ever be right about anything.

03/23, 5:36 PM

posted by:

murderedout

Buicks are more reliable than Lexus’s. Lexus rust easy.

03/23, 6:01 PM

posted by:

jackjimturkey

Zo0M 6 Zo0M: “you cant fool the Japanese who are amongst the smartest people in the world.” Toyota’s problem in a nutshell.

However, the Avalon has no direct faux-luxury counterpart. It’s a stretched Camry.

187out: “Buicks are more reliable than Le—s.” No ****. What’ll you say next, that the Patriots are better than the Clarenceville Trojans

03/23, 6:03 PM

posted by:

autonut

RicardoHead, I believe in gravity and promote evolution.

03/23, 6:13 PM

posted by:

Stinky007

So this happens when bull**** hits the fan?
Toyota is getting it’s rear kicked all over the globe. It seems that their struggle to be the biggest manufacturer in the world has had some negative influence on the quality of their products. If I’m not mistaken, one of their CEOs or something actually said that.
So GM and Ford are not alone in their problems…

03/23, 7:01 PM

posted by:

corvette

Lexus is a joke, as a company they are an insult.

03/23, 7:03 PM

posted by:

Impulsive

‘autonut’, what other luxury manufacturer offered that service? That is not what defines luxury … well, maybe to you.

Luxury is a combination of features. Design, build quality, amenities, out-of-the-ordinary presence, a sense of opulence. Service is but a small part of the package … would you consider a MINI luxury if they picked up your car and serviced it for free and returned it? Hell no.

It is FACT that mnay people with money don’t know what to do with their money … they buy expensive **** because they believe, falsely, that it is worth whatever they paid … foolish … and for you to believe otherwise is tantamount to immaturity.

03/23, 7:06 PM

posted by:

Htay9500

“I am sure people with money would like to purchase luxury from Lexus in Japan, but they cant do it any more or better then from Toyota. Most of Japanese families changes car every 2 years. The law requires that after 2 years dealer provide overhaul for which consumer MUST pay. The salesman comes to the house (you don’t have to go to a dealer) and arranges exchange: dealer picks up 2 year old car and delivers a new one. If anyone wants to complain about CAFE or NHTSA: please entertain me. The described process applies to all cars: 600cc micros and 4.3L Crown.

Comment by autonut, posted on March23 at 2:02 pm”

where did you hear that?

03/23, 7:08 PM

posted by:

RicardoHead

autonut, i was referring to that freaky christian jjayc08 and not to you.

03/23, 7:20 PM

posted by:

A True Gear Head

Well Audi certaintly isnt the pinnacle of automotive engineering. In fact they might be the ****tiest marque in the industry. I place VW/Audi just in front of Hyundai/Kia as far as reliability and quality.

03/23, 7:20 PM

posted by:

1c3d0g

Of course it’s underperforming, you’d have to be a fool to pay for an overpriced POS Toy Ota. Any idiot with half a brain can see this and will opt for a better choice.

03/23, 9:12 PM

posted by:

jjayc08

autonut- Where did you read on that? I had heard about a similar system of updates in Japan, and the taxes they had on larger engines but…

impulsive- All those features you mentioned are all there to pamper you in a luxury vehicle. Same for a good protection and maintainence (es) plan, or at least one that goes the extra step to ensure your vehicles in alright shape. Most dealerships that do offer this though, just hire or tutor kids starting on their own at a car shop, to check simple things like brakes and wheel alignment, but maybe Lexus is different. I wouldn’t consider the vehicle itself luxury, but the features and contract that come with it is all the more welcome in a vehicle that will never be understood because of all the gismo’s by your average joe in his garage.

03/23, 10:46 PM

posted by:

autonut

Htay9500, jjayc08, I worked in Tokyo for a short period of time, I did not to read about it. My colleagues shared their life experiences. FYI Japanese believe in evolution, great in math and sciences and ions ahead of us in use of technology, especially elctronics.

Stinky007, the major difference between Toyota and all domestic auto manufacturers that Toyota makes a lot of money. GM, Ford and Chrysler loose a lot of money. If such trend continues you’ll either walk, ride Chinese made bicycle or drive Japanese, Korean or Chinese car.

03/23, 11:28 PM

posted by:

jjayc08

autonut- I’ll take your word for it. As I mentioned, I had heard something similar.
BTW, the name “hacking” still continues, I’m pretty sure that isn’t the actual user “ricardohead”. I’d just let it pass.

03/24, 12:14 AM

posted by:

zoomzoomr

To correct jjc: The Lexus GS was previously sold as the Toyota Aristo in Japan, not the Crown. The Lexus SC was previously sold as the Toyota Soarer. And the Lexus ES is essentially a rebodied Toyota Camry, not the stretched Avalon. It makes total sense that the Japanese wouldn’t bite at these renamed, higher-priced vehicles they have already seen as Toyotas — Americans did the same thing when Cadillac tried to shove Chevy Cavaliers down our throats as Cimarrons, and when Audi tried to sell badge-engineered VW Dashers as the Fox!

03/24, 1:43 AM

posted by:

Stridder44

Too bad 95% of them are ugly as hell.

03/24, 4:55 AM

posted by:

nestle_s

well when i went to japan to visit my uncle they are all basically rebadged home market toyota’s. so if you can get a car 20-30% cheaper as a toyota why would you go for the lexus branded one? same goes for the skyline coupe and sedan (G35/G37), nissan fuga (M35/M45), nissan cima (Q45) etc. but knowing toyota they will find a way. but it will be hard.

03/24, 8:55 AM

posted by:

A4

good thing nobody was talking about audi then gear head.
and actually when they have their 2nd generation of dual-clutch automatics coming out before almost anyone even has their first, sounds like they may be farther out front than most. On top of it, among the competitors the MMI interface is regarded as the best next to iDrive and COMAND, and when was the last time anyone had an AWD system as good as quattro, especially across every single model line? And I’m not even going to bring lexus into this crap. Just because they slap a bunch of duracells in the trunk of a 4500lb car doesnt make them “earth friendly” and certainly not technologically advanced. Everything ive read of the LS600hL says theyd rather just save their money or buy a real 12 cylinder. Or an 8-cylinder with the same power for that matter, sans the trunk full of AA’s.

03/24, 9:31 AM

posted by:

Ricardo Head

Autonut, jjay, that isn’t me posting above. Apparently LP is back masquerading as me this time.

03/24, 9:53 AM

posted by:

SwerveEarly

The Japanese are famous for under performing at home. Their divorce rate is very high becaus of it.

03/24, 11:26 AM

posted by:

Htay9500

If I had to do business in Japan, I’d get a crown majesta or a subaru legacy sti wgn.

03/24, 2:20 PM

posted by:

jackjimturkey

In Japan, I’m partial to the Nissan Primera.

03/24, 11:03 PM

posted by:

Veda

With the fact that you can optioned most cars in Japan any way you like straight from the dealer, it doesn’t make much sense to buy the same exact expensive models only for the service and logo. The case in US is different since the cars in the Lexus lineup aren’t being offered as Toyotas.

Anyway, car prices in Japan are screwed anyway since a bare “premium” model may cost the same as a fully optioned “low class” one.

03/25, 4:05 AM

posted by:

meekin111

It is amazing that half of lexus sales are the LS especially in Japan with all its tiny cars.

03/25, 10:50 AM

posted by:

Buhbye

Lexus – overpriced and overrated. The Japanese people recognize this. Service is the only reason they caught on here. Autonut – Americans will never have to drive Asian cars or ride Chinese bicycles. We have the aftermarket to supply parts for many old American icons. Mustang, for one.

 
 
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