Why Is Toyota So Optimistic About the Lexus?

Toyota Motor Corp (NYSE:TM) is expecting record sales from its luxury Lexus vehicles this year, hoping to surpass its 2007 record of 518,200 Lexus vehicles sold worldwide.

Lexus has consistently been a popular car among its consumers, evidenced by it being the top selling luxury brand in the United States in 2011. Although the earthquake and tsunami that occurred in Japan in 2011 spoiled production, the company was able to recover and post sales of 476, 500 Lexus vehicles sold globally in 2012.

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The current state of the yen in Japan has also boosted Lexus sales, as a weaker yen strengthens the luxury vehicle’s appeal globally and especially in the United States. According to Reuters, the yen has lost about 20 percent of its value against the U.S. dollar since mid-November, which is significant for Lexus as it manufactures more than 80 percent of its vehicles in Japan, while exporting almost 90 percent of them.

However, the country’s currency hasn’t always worked to Lexus’s advantage. Its sales were especially hindered during the 2008 global financial crisis when the high value of the yen killed the luxury vehicle’s appeal to exporters. Since then, the brand has been on an upward road to recovery, but is appearing to reach its peak, as its operating margin is expected to be around 20 percent this financial year, compared to its rival, BMW, which only posted a 10.8 percent margin in 2012.

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