Lexus Gets Its Horse Back in the Luxury Car Race
The race for dominance in the luxury segment has, in the U.S. anyway, been primarily held between the three big German manufacturers which, over the years, have turned the production, marketing, and sale of luxury cars into a science. However, for the second time in the last five months, Toyota’s Lexus (NYSE:TM) has shown that it’s a force to be reckoned with as well, as it outsold Mercedes-Benz (DDAIF.PK) in May, and came within 12,000 sales of toppling the leading BMW (BAMXY.PK).
It’s likely that this gap will only narrow over the next several months and coming years, as Lexus is priming for the release of the NX, a compact crossover that will go toe-to-toe with BMW’s X1, Mercedes’ GLK, and Audi’s so far unreleased (stateside, that is) Q3. The RC sports coupe will also be joining Lexus’ lineup, which has long been devoid of any middle-ground performance offerings, save for the IS F sedan and the LFA supercar. The RC will compete with BMW’s 4 Series, Audi’s A5 and S5 (and maybe even RS5), and several of Mercedes’ many coupes.
“The volume is not the goal, it’s to do the right things,” Mark Templin, the executive vice president of Lexus, told Bloomberg in an interview in Tokyo. “It’s nice to know that people are responding to the new products we’ve launched. Over the last two years, we’ve had a string of hits.”
Templin is referring to the redesigned IS line of sedans, as well as a general overhaul of the Lexus design language that now finds itself on everything from the CT 200h hybrid hatchback to the GS SUVs. It’s defining characteristic is the hourglass shape of the snout, which has been met with mixed results in automotive circles, but seems to be well loved by the general car-buying public.
Lexus was doing quite well up until 2011, when an enormous tsunami paralyzed Japan’s ability to export and caused extensive damage to local companies operating in the region. During that time, BMW and Mercedes surpassed the brand in U.S. sales and retained its lead, at least until more recently. With a new slate of competitive products, Lexus is once again regaining its ground.
“Toyota’s made the argument Lexus isn’t going to go down market,” Christopher Richter, a Tokyo-based CLSA auto analyst told Bloomberg by phone. “There’s a case for it, because by having cars like that you run the risk of diluting and lessening your brand.” Richter is referring to the sub-$30,000 segment, where a new fight between the Audi A3 and Mercedes CLA is playing out for entry-level luxury customers. However, the brands risk losing its brand value if it pursues vehicles that are sold for too little.
Lexus was the U.S.’s top selling luxury brand throughout the first-quarter of the year on a retail sales basis, and according to IHS Automotive data, Lexus sold 65,475 cars and SUVs to individual customers during the period versus the 63,483 sales for Mercedes and BMW’s 63,353, Bloomberg said. Prior to 2011, Lexus held an 11 year winning streak, which the earthquake and tsunami quickly snapped. In 2013, Lexus trailed BMW by some 35,000 units.
Lexus says it won’t be surpassing its peak of 330,000 vehicle sales in the U.S. this year, but it will be adding growth to its all-time global record of more than 523,000 vehicles, Bloomberg said. Profits, however, are on track to break the mid-2000s highs as Japanese firms are benefiting from the yen’s 23 percent slide.
Lexus’ parent, Toyota, was recently determined to be the number three most environmentally friendly automakers, according to a survey of the eight largest manufacturers operating in the U.S. by the Union of Concerned Scientists. Here are a couple of them; you can read the full report here.
The first non-American automaker on the list is also the first to hit a score less than the industry average of 100. Volkswagen was able to hit a score of 92.6, well-below all three American companies. The score also puts them right in the mix with the next few companies as well. Volkswagen has been a long-time leader in efficiency standards, introducing many diesel-powered models and smaller cars built for the open road.
The company has announced redesigns to models like the Passat that will also help its score in coming years by making the car lighter and smaller, along with coming hybrid models. For now, Volkswagen is in the thick of it, but still a ways behind the top environmentally friendly car maker.
Tied with Volkswagen in the 2014 rankings is Nissan. Much like Volkswagen, Nissan’s score of 92.6 puts it way ahead of American manufacturers, but still lagging behind the top companies. Nissan has a fairly diverse lineup that includes several car models in addition to pickup trucks and SUVs.
The company’s adoption of aerodynamic designs and fuel-efficient technology have all made a difference, and in coming years Nissan should be able to lower its score substantially. The popular Leaf EV that Nissan produces is already climbing the charts as a customer favorite, but still has a long way to go before it can match up with the sales of cars like the Prius. The Leaf has probably been a big factor in bolstering Nissan’s score, which should improve with time.
Breaking into the top three is Toyota, which isn’t that much of a surprise to anyone who has been following the auto industry over the past decade. Toyota bested Nissan and Volkswagen by a small margin, hitting a score of 92.2 on the report’s scale. While Toyota is playing catch-up with two other car companies, it still completely outclasses all three American car makers.
Toyota has been a leader in building efficient vehicles for many years now, as even its pickup trucks and SUVs tend to hit very good efficiency marks. The company’s car line, especially models like the Prius, play a major role in jetting Toyota up the rankings. As the technology continues to improve and become more popular, Toyota can look forward to hitting even better scores in the future.
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