jruhi4

Here's the thought-provoking BusinessWeek story:

Lexus: Too Japanese for the Japanese
Why Toyota's luxury lineup is getting little traction at home—while German brands remain an obsession
By Ian Rowley, with Hiroko Tashiro in Tokyo

When Toyota introduced its Lexus brand in Japan three years ago, the company was hoping drivers like Masayoshi Haku would swoon over the luxury lineup. The 46-year-old doctor is a car lover with a $110,000 BMW 750 sedan and a $60,000 Porsche Boxster, so he should have been a prime customer for Lexus. But Haku hasn't taken the bait. Why? Lexus is too Japanese for his tastes. "Lexus makes excellent cars. But if you ask me whether I'd buy one, the answer is no," says Haku. "Foreign brands have more individuality."

For most Japanese car buyers, "foreign" really means "German." Although Lexus hit American showrooms 19 years ago and has been the top-selling luxury nameplate in the U.S. since 2000, it didn't arrive in Japan until 2005. By that time German brands dominated the high end, and Lexus has had a tough time getting a toehold, reaching only 60% of Toyota's initial sales projections. In 2007, Lexus moved 34,800 cars—about what it sold in December alone in the U.S.—and sales so far this year are down.

A big problem was the initial lineup. The company started with just three models: the $52,000 GS sports sedan, the $68,000 SC convertible, and the entry-level IS sedan, starting at about $40,000. All three had previously been available in Japan under the Toyota nameplate—for about 20% less than the Lexus models.

Worse, the buzz Toyota created for Lexus may have benefited the Germans. Following the Lexus launch, rivals say they saw increased interest as customers then visited BMW, Mercedes-Benz, and Audi showrooms to compare. "The introduction of Lexus is energizing the luxury car market," says Ashvin Chotai, an independent auto consultant. But few customers have steered away from the German makes. Chotai says 80% of early Lexus buyers were former Toyota drivers; only 5% came from Mercedes or BMW. "Getting Lexus accepted as a bona fide luxury brand seems to be a lot harder in Japan than in the U.S.," says Chris Richter, an auto analyst at brokerage CLSA. "It's one of the rare times Toyota has stumbled."

Japan's German-car obsession shouldn't have been news to Toyota. Wander through Tokyo's upscale wards and you'll find no shortage of expensive German models, even though they're often too big to comfortably navigate Japan's narrow streets. And many of them have the steering wheel on the left, the European standard, rather than on the right, Japan's norm. "I wanted to drive an authentic BMW, like the ones in Germany," says Yoshihiro Nakahashi, who runs a Web site for BMW fans and pilots a left-hand-drive BMW 320si.

Still, few are giving up on Lexus in Japan. After all, Toyota has 45% of the car market there, it has built 160 plush Lexus dealerships at an estimated cost of $10 million each, and it has booked tons of prime-time TV ad slots. Most important, Lexus added the latest version of its flagship, the $77,000-plus LS sedan, to its lineup in September, 2006. Last year it accounted for more than half of Lexus sales in Japan.

Toyota says Lexus' fortunes are improving. In the segments where Lexus competes, the company claims it outsells German rivals. Mercedes' numbers, Toyota notes, include its A-class small car, and BMW sales figures count two SUVs. Lexus doesn't sell an SUV in Japan, though the mid-size RX is due in 2009. And Lexus last year topped buyer surveys by researcher J.D. Power & Associates. "It's going to take Lexus three to five years to create a brand image to rival Audi, BMW, or Mercedes," says Hiroaki Kihara, editor of magazine Autocar Japan. "But they took many years to establish their brands in Japan, too."

http://www.businessweek.com/magazine...lobal+business

llamaboiz

haha wanting DTM cars is nothing new in japan. all i can say is, duh.

PhilipMSPT

iTrader: (5)

The writer (and the Japanese market) doesn't realize the difference between the last gen GS, SC, and IS; versus the new generation models that are now "more Lexus, less Toyota."

We all know that there is nothing even close to the GS, IS, nor SC in the Toyota line-up, and I hope that Lexus of Japan can further make the distinction...

jruhi4

While that's certainly true in the case of the current Lexus GS and IS, the current retractable-hardtop convertible Lexus SC was launched as the final-generation Toyota Soarer in Japan and, during its mid-life, model-year 2006 mid-life facelift (tweaked grille, front bumper and taillights, plus redesigned wheels), was rebadged Lexus SC430. Thus, in that case, the JDM saw nothing more than a rebadged, barely-changed high-end Toyota.

Admittedly, I have no clue whether or not that Soarer-to-SC rebadge was met with the 20% price jump in Japan the author claims for the IS-vs-Altezza and GS-vs-Aristo. Also, especially in the IS-vs-Altezza, a 20% price jump would be justified by wildly varying standard equipment levels, not just the luxury badge.

blacksc400

iTrader: (4)

it is simple, expect the new LS460/L/600L all other lexus model for sale in Japan was previously availible in Japan as Toyota models, when Toyota lauched Lexus in Japan.

TRDFantasy

Nothing really new here. The article makes a point that it took the German brands years to establish a reputation in Japan, and it will take Lexus several years as well. It doesn't happen overnight.

It's silly to criticize Lexus just because they didn't achieve the German's reputation overnight in Japan.

The article also did not mention that the LS hybrid is achieving high conquest rates from the Germans, as well as the GS hybrid. The sales volumes for the hybrids might be low, but it's a matter of perception. Right now Lexus has a unique selling point with luxury hybrids, not just in Japan but in other markets as well. When the next-gen RX hits Japan next year, the hybrid variant could take some serious conquests from the German brands. It's also likely that the IS-F might be taking some conquests.

It's true that Lexus sales have not met Toyota's expectations, but in only 3 years Lexus annual sales are close to the German brands.

Nextourer

I don't think anyone would mind when the IS-F hits the street. I mean.. would they rather have an IS-F or an Altezza GT-S lol.

flipicanez

iTrader: (1)

A lot of us Americans aren't into Lincoln and Cadillac, although nice cars we aren't willing to accept them as true luxury brands.

Germans consider MB and BMW as average cars and use them as Taxi's while Japan luxury and big mushy American luxury are considered as signs of true success.

I'm not surprised at this, but I think some of the reasons are not explained in the article.

GRAND_LS 4

iTrader: (2)

I agree. The notion of "grass is greener on the other side" exists here just as much.

encore888

Interesting brief article, and it really is a glass half full/empty scenario, you can pick how to spin it. Initially, sales were quite below the rather high targets Toyota set, and thus all the feeder notions of 'Japanese prefer foreign' have come into being.

What amazed me is how the LS 460/600h launch has now taken up half the brand's sales...that's a much higher amount than in N America; AND the 600h is the best seller of the LS series. Sales have been improving, although this year sales are down here in the US and in Japan.

ecr527

Just how it took years for them to gain acceptance as an individual luxury brand here, it'll take years for them to accept these vehicles as a luxury car brand in Japan, especially since they sold most of these models over there as a Toyota just recently. People always seem to want to drive an import luxury car. Case in point, if you lived in Germany, would you really want to drive a Mercedes, and have someone pull up next to you in the same car, but it's a taxi??