eyeball

http://www.bloomberg.com/news/print/...xury-cars.html

Lexus Splits With Germans, Shuns Sub-$30,000 Luxury Cars
By Craig Trudell - Dec 5, 2013 Toyota Motor Corp. (7203)’s Lexus, no longer the top-seller of luxury vehicles in the U.S., will make reclaiming leadership tougher on itself by choosing not to chase German brands introducing cheaper cars, an executive said.

New entry-level vehicles such as Daimler AG (DAI)’s $29,900 Mercedes-Benz CLA are a primary reason that sales of premium autos have accelerated faster than the total industry this year, said Jeff Bracken, group vice president and general manager of the Lexus division. Volkswagen AG’s Audi unit plans to introduce an A3 sedan next year that will match CLA’s price.

“Some of our competitors have gone down below $30,000,” Bracken said in an interview today in Detroit. “For Lexus, we won’t be doing that. That is not part of our strategy.”

Lexus, which ruled the U.S. premium segment for 11 years through 2010, has fallen behind Bayerische Motoren Werke AG’s BMW, which led in 2011 and 2012, and Mercedes-Benz, this year’s frontrunner entering December. Lexus’s least-expensive cars include the CT hybrid, which begins at $32,050, and the IS sport sedan, redesigned this year and starting at $35,950.

Lexus posted a 13 percent increase in deliveries for November, helped by a 99 percent gain for the new IS, which was updated with a lower seating position, stiffer frame and a “spindle” grille that’s the new face of the brand. U.S. deliveries for the Toyota City, Japan-based company’s division climbed 12 percent to 239,090 during the year’s first 11 months.

Mercedes widened its U.S. lead over BMW in November as sales of the new entry-level CLA coupe contributed almost all of its monthly gain.

Wider Lead
Deliveries for the unit of Stuttgart, Germany-based Daimler climbed 14 percent through the year’s first 11 months, extending its lead over Munich-based BMW to 7,610 vehicles. BMW’s entry-level coupe, the 1 Series, starts at $31,500.

The German automakers’ results don’t include Daimler’s cargo vans and Smart cars or BMW’s Mini brand, which aren’t luxury vehicles.

Lexus trails Mercedes by 40,411 and BMW by 32,801 vehicle deliveries this year through November. The brand probably will finish 2013 with about 270,000 sales, up from 244,166 a year earlier, Bracken said.

“We have not yet locked in exactly what that number will be for 2014,” he said. “We’ll be bumping up right against 300,000.”

While Lexus expects higher sales for 2014, it may continue to trail Mercedes-Benz and BMW because of its decision to avoid chasing its German competitors on entry-level vehicle prices. The Toyota and Scion brands “represent sub-$30,000 price points appropriately,” Bracken said.

“I would love to be the luxury leader again, but I think it really makes it difficult, because clearly there is more volume” of sales for vehicles priced less than $30,000, he said. “And since we are not going there, it just makes it even that much more difficult for us.”

To contact the reporter on this story: Craig Trudell in Detroit at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net
.

KumaF

Not a bad strategy if you ask me. Merc and Audi will get more sales with CLA and A3 sedans, but I wonder if that would be worth the risk of diluting their brand image.

moose66

Calling the BMW 1 series a luxury automobile is a joke. The only thing luxury about that car is the badge. Let them roll Lexus. Stick to your guns.

dbs600

The 1 Series is not bad for what it is, but a luxury car it is not. What is bad, however, was the HORRIFIC X1 I recently had as a loaner when my BMW was in for service. Felt like a cheap, American-built rental; no joke. I COULD NOT believe it. Definitely not worthy of the BMW badge, and unfortunate at that.

Don't get nonsense that Lexus wants to the keep the IS price down, though, as the Luxury and F Sport Packages cannot be combined in the US, unlike in other countries, which strategy indirectly conflicts with the article (don't want to go sub $30k, but don't want to go north of $50k either). :|

Glashub

^^^^

Above 50K puts them in competition with whole other set of cars. The IS has been a sub 50K brand for years and it's equity is in being a sub 50K brand. Each and every review I've read has been basically been this is one sweet ride as long as they keep it under 50K.

dbs600

The IS is a direct competitor to the A4, 3 Series and C-Class, all of which can push $60k+. I'm not saying to go to $60k, but also don't see anything wrong with topping out at $53-55k for a proper Lexus that combines both the Luxury and F Sport Packages.

redcupr

It's good to hear that the IS will continue to be the 'Entry Level' Lexus. If they bring in a model below it, the IS will get pushed up closer to the GS, the GS get bumped up, and so on.

Think of the original Toyota 4Runner, a great basic 4x4 SUV. Toyota kept upping the specs, that they had to add the RAV4, now the RAV4 is getting to be "too nice", so they'll need to bring something in under it.

dbs600

What happened to the CT? Discontinued? But yes, the new CLA is garbage!

Glashub

The truth is that Lexus does not have the brand cachet of the Germans. Brand cachet empowers the Germans to do what Lexus can't. Audi is the 43rd most valuable brand and Lexus 73rd. The IS is best of the best under 50K according to AJAC, https://www.clublexus.com/forums/is-...under-50k.html.

Here's the cars the IS would have to compete against in the AJAC COY $50,000 Plus showdown, http://www.ajac.ca/web/ccoty/2014/co...ry.asp?cat=169

It is a disservice to compare Lexus to Audi BMW, and MB. Different companies with different resources, goals and objectives. MB has been building a brand for what 100 years? Lexus about 24 years?

hoosier1

Luring buyers into the brand with sub 30 grand cars could pay off in the future. However, as indicated in other threads, you won't find a CLA, 320 or A3 on a dealers lot for less than $35,000. The key is to move Americans out of overpriced SUVs and trucks to higher end cars. If you are shopping for a Chevy SUV or truck that stickers for $35,000 plus, why not consider stepping up to a luxury car. You have to remember that BMW and MB do not have another brand such as Toyota to sell. A Prius can sticker for $35,000. Lexus should just come out and state that if you want an entry level Lexus, buy a Toyota.

As for the IS, my local dealer has no inventory with a sticker price less than $40,000. I wanted AWD, real leather, wood trim, BSM, memory seats, navigation, heated seats and all-season tires, and I would have gladly paid more if my IS had the ML stereo, additional soft-touch interior panels and more wood trim. But, my IS stickered for $46,328, so you can easily reach 50 grand for an IS250.

redspencer

iTrader: (1)

According to the LEAP Index from New Media Matrix, Forbes reports that Lexus is the #2 Most-Loved Brand of 2013 just behind Apple. This makes Lexus the #1 Most-Loved automotive brand with an 18.7% increase from 2012.


Source: http://www.forbes.com/sites/jennifer...ent-see-gains/

Glashub

^^^^
Not sure what "most loved" brand means. I love a woman. I like my IS.

I'm talking dollar power value which at the end of the day is a better benchmark of how a brand is perceived. Also note Audi spent 55MM on advertising and Lexus about 19MM.

Here is the Forbes list, http://www.forbes.com/powerful-brands/list/.

dbs600

Have to disagree. Mercedes-Benz, BMW, Audi, Jaguar and Lexus all have direct competitors with one another and are all constantly looking at what each other is doing. Their goals and objectives are all the same; sales numbers and profit margins, but in terms of brand perception, the next tier down would be Infiniti, Acura, Volvo and Saab, from which $100k vehicles are not available. Nevertheless, direct comparisons can be had amongst all. In terms of resources, they're all behemoths (except Volvo and Saab). And after all, luxus is german for luxury...

Glashub

I agree with you. I should've elaborated. I meant that it's unfair to compare what Lexus can get away with to what the Germans can get away with. Americans will pay 60K or more for a 3 series -- that's what best car award for 10+ years and the constant refrain of Ultimate Driving Machine will get you. Lexus knows full well Americans except for a few outliers would not pay 55K-60K for an IS. Here's how deep this branding runs. I said to a co-worker, a very wealthy man, that's a nice Lexus. He replied, "It's just a Toyota. Why would anyone pay more for a dolled up Toyota." Then he got into his 5 series and drove away.

See, most people don't do the research. The brand carries all of the information they need intellectually and emotionally. Lexus will always be the prettier sister of Toyota so to speak. BMW and MB are stand alone companies which have spent billions since world war 2 creating their brand. Even Germany the country has created a brand which supports it's corporate brands. The Germany brand = precision, engineering excellence, efficiency, quality, etc.

dbs600

Understood and agreed, except for German brands being efficient. When I think German, I think over-engineered, not in a bad way, and when I think Japanese, I think efficiency and reliability, in a good way. Nevertheless, the cost-benefit to limiting the IS to $50k is more expensive due to lost sales than marketing and selling one at $53k (combining the Luxury and F Sport Packages) with all features one would expect on a current day $50k car.