Should the LS 460, 460L be priced head-to-head with Germans
09-01-06, 04:03 PM
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Should the LS 460, 460L be priced head-to-head with Germans
LS 460 is a remarkable feat of engineering.
1. Leading edge design and craftsmanship
2. Highest efficiency V8 with class leading power. Leader in Fuel efficiency
3. World's first 8-speed automatic.
4. Groundbraking safety technology with several world firsts
5. Unsurpassed luxury.
6. Legendary reliability.
7. Remarkable improvement in agility.
Only Downside:
Still playing second fiddle to germans on pricing. Dan Neil says "Cut rate, value priced Prestige LS" is an oxymoron. He may be wrong on all other counts but he nailed this one.
Its time to soar higher. Should Lexus position the new LS head-to-head with the Audi and BMW??? Thats the burning question.
1. Leading edge design and craftsmanship
2. Highest efficiency V8 with class leading power. Leader in Fuel efficiency
3. World's first 8-speed automatic.
4. Groundbraking safety technology with several world firsts
5. Unsurpassed luxury.
6. Legendary reliability.
7. Remarkable improvement in agility.
Only Downside:
Still playing second fiddle to germans on pricing. Dan Neil says "Cut rate, value priced Prestige LS" is an oxymoron. He may be wrong on all other counts but he nailed this one.
Its time to soar higher. Should Lexus position the new LS head-to-head with the Audi and BMW??? Thats the burning question.
09-01-06, 04:04 PM
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LS pricing vis-a-vis germans over the years
A very significant price trend between LS and its competitors.
Data collected from Carsdirect. To be fair to germans, the comparison is between
LS (400,430) vs 7-series (SWB), A8 (SWB), S430 (not S500)
Data collected from Carsdirect. To be fair to germans, the comparison is between
LS (400,430) vs 7-series (SWB), A8 (SWB), S430 (not S500)
Last edited by Stevekil; 09-01-06 at 04:07 PM. Reason: some clarification
09-01-06, 04:14 PM
#4
Based on those trend lines it seems the status quo has been maintained so far as price, but the LS increase has not been as sharp as the others. Note however that volume might tell a different story, because in the US the LS outsells the 7-series, S-class, and A8.
I think the New LS represents an opportunity to move upmarket with the LS in price, but also in features. The 460 L and 600h L represent that opportunity. However I'm forecasting the LS 460 SWB to have a more modest increase.
One thing to note is that Lexus has achieved #1 in sales in the US, but uses a value price system to its advantage on its models. Perhaps the LS will have less of that.
There is an argument out there among luxury car aficiandos that suggests price = prestige. If Toyota/Lexus is cutthroat enough, they might try to 'overcharge' like the Germans. Because their production methods and designs are more efficient, they will make even more $$$ and hopefully that will make their designs even more segment-leading than before.
But it will undercut the value proposition for buyers.
From wikipedia http://en.wikipedia.org/wiki/Image:Luxury-brands.gif
I think the New LS represents an opportunity to move upmarket with the LS in price, but also in features. The 460 L and 600h L represent that opportunity. However I'm forecasting the LS 460 SWB to have a more modest increase.
One thing to note is that Lexus has achieved #1 in sales in the US, but uses a value price system to its advantage on its models. Perhaps the LS will have less of that.
But it will undercut the value proposition for buyers.
From wikipedia http://en.wikipedia.org/wiki/Image:Luxury-brands.gif
09-01-06, 04:16 PM
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More on pricing, the oracle spoketh
Overcharge??? I think thats a philosophical issue. Charging more will allow Lexus to invest that extra money in engineering. Toyota is loaded with money, but more money doesnt hurt.
Also, prestige is intricately related to Luxury as Dan Neil of LA times and Eisenstien of CarConnection have noted.
Its time to soar higher! LS should match A8 and 7-series pricing.
09-01-06, 04:18 PM
#7
Based on those trend lines it seems the status quo has been maintained so far as price, but the LS increase has not been as sharp as the others. Note however that volume might tell a different story, because in the US the LS outsells the 7-series, S-class, and A8.
I think the New LS represents an opportunity to move upmarket with the LS in price, but also in features. The 460 L and 600h L represent that opportunity. However I'm forecasting the LS 460 SWB to have a more modest increase.
One thing to note is that Lexus has achieved #1 in sales in the US, but uses a value price system to its advantage on its models. Perhaps the LS will have less of that.
There is an argument out there among luxury car aficiandos that suggests price = prestige. If Toyota/Lexus is cutthroat enough, they might try to 'overcharge' like the Germans. Because their production methods and designs are more efficient, they will make even more $$$ and hopefully that will make their designs even more segment-leading than before.
But it will undercut the value proposition for buyers.
From wikipedia http://en.wikipedia.org/wiki/Image:Luxury-brands.gif
I think the New LS represents an opportunity to move upmarket with the LS in price, but also in features. The 460 L and 600h L represent that opportunity. However I'm forecasting the LS 460 SWB to have a more modest increase.
One thing to note is that Lexus has achieved #1 in sales in the US, but uses a value price system to its advantage on its models. Perhaps the LS will have less of that.
There is an argument out there among luxury car aficiandos that suggests price = prestige. If Toyota/Lexus is cutthroat enough, they might try to 'overcharge' like the Germans. Because their production methods and designs are more efficient, they will make even more $$$ and hopefully that will make their designs even more segment-leading than before.
But it will undercut the value proposition for buyers.
From wikipedia http://en.wikipedia.org/wiki/Image:Luxury-brands.gif
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09-01-06, 04:22 PM
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Why should Lexus charge more?
That again is a philosophical musing. I think LS should position itself in top1% of the vehicle market which means higher than
$65,000.
Now if you find it expensive, there is GS to look for! That is why lexus has modeled itself into 3-tier player like germans
IS, GS and LS.
So if LS is overpriced or out of budget, move to GS, and if that is too much, then move to IS. Or the other way around.
There is a feeling of confidence which comes when you are in top 1% playing with top guns. It can only help Lexus.
LS should be out and out for top dollar, should pull no punches. GS should be enhanced to fill in for low end LS 430 of the past.
Last edited by Stevekil; 09-01-06 at 04:31 PM.
09-01-06, 04:31 PM
#9
ok, i agree, but isn't that how it's working now? talk about loaded is350, it's around 40k. loaded gs450h/430, it's about 58k? loaded ls460, i think it's going to be around 74k (my guess, on swb).
so it's placed very evenly? you can't put together a loaded gs430 with a base ls460 (which imho would be hard to find anyway)
so it's placed very evenly? you can't put together a loaded gs430 with a base ls460 (which imho would be hard to find anyway)
09-01-06, 04:42 PM
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Golden Rule:Differentiation brings clarity, clarity brings class, class brings wealth
ok, i agree, but isn't that how it's working now? talk about loaded is350, it's around 40k. loaded gs450h/430, it's about 58k? loaded ls460, i think it's going to be around 74k (my guess, on swb).
so it's placed very evenly? you can't put together a loaded gs430 with a base ls460 (which imho would be hard to find anyway)
so it's placed very evenly? you can't put together a loaded gs430 with a base ls460 (which imho would be hard to find anyway)
Actually I am following the tried dictum of Peter Drucker (management god) and Jack Welch (Former GE god). There has to be clear differentiation. And differentiation comes from reducing elasticity.
LS has been too elastic in the past and its range has been floating. It needs to widen the differentiation.
By creating a clear price gap of $15,000, the resulting differentiation will attain clarity and cut-through turbidity. This will create a psychological wealth exuberance, an itch so to say.
The past: GS = 52K just 5K shy from LS 430 base.
But reality states: LS should be 10-15 K away from loaded GS. So it should start at 67-68K base (SWB LS) and 72K = LWB LS.
Steve Kilburn
Last edited by Stevekil; 09-01-06 at 04:49 PM.
09-01-06, 04:54 PM
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Here is a more clarified version of the graph
This graph shows clear gaps which fuel contempt for Lexus as a cut-rate brand.
09-01-06, 05:07 PM
#14
Actually I am following the tried dictum of Peter Drucker (management god) and Jack Welch (Former GE god). There has to be clear differentiation. And differentiation comes from reducing elasticity.
LS has been too elastic in the past and its range has been floating. It needs to widen the differentiation.
By creating a clear price gap of $15,000, the resulting differentiation will attain clarity and cut-through turbidity. This will create a psychological wealth exuberance, an itch so to say.
The past: GS = 52K just 5K shy from LS 430 base.
But reality states: LS should be 10-15 K away from loaded GS. So it should start at 67-68K base (SWB LS) and 72K = LWB LS.
Steve Kilburn
LS has been too elastic in the past and its range has been floating. It needs to widen the differentiation.
By creating a clear price gap of $15,000, the resulting differentiation will attain clarity and cut-through turbidity. This will create a psychological wealth exuberance, an itch so to say.
The past: GS = 52K just 5K shy from LS 430 base.
But reality states: LS should be 10-15 K away from loaded GS. So it should start at 67-68K base (SWB LS) and 72K = LWB LS.
Steve Kilburn
LS WILL go up in pricing. Same as ES, IS and GS going up in pricing. Especially when fully optioned.
But there is no reason to overdo it.
Despite those MSRP prices (among luxury brands):
a. Lexus dealers make most per car sold
b. Lexus makes most per car sold
There was an article last year which gave reasons why Lexus dealers were happiest in the industry - LS at 70k made more profits for the dealer than S class at 90k for MB dealer.
09-01-06, 05:12 PM
#15
There's also the issue of negotiating leeway, I remember reading that Mercedes has had very strict limits on how much discounting, etc. can be done by the dealer. Lexus dealers can discount, add dealer-installed options, etc. more freely. However Lexus corporate frowns on 'sales' except for the Lexus Golden Opportunity Sales Event.