Blog: Dave LeggettLexus in Europe

Dave Leggett | 1 September 2005

[Editorial from this week's Editor's Weekly Highlights Newsletter] I remember when Lexus rolled out its LS400 luxury saloon in the UK (Toyota Celsior in Japan) around 1990. The design came across as highly derivative (let’s take a little Benz, add a pinch of BMW) and a little bit contrived, bland even. And it was a Toyota underneath. A pretty cynical exercise, some critics said. For all the car’s undoubted refinement put together in a very competitive package, it was largely seen as a poor man’s Mercedes.

A brand lacking heritage at that end of the market didn’t help either and, even as more models have emerged subsequently, it has taken Lexus a very long time to get a toehold in the conservative European luxury car marketplace.

Europe has provided quite a contrast to the brand’s rapid sales success in the US.

Lexus managed to sell around 20,400 units in Western Europe last year against some 296,200 units in North America. North America was always a priority (check that LEXUS name – Luxury EXports to US) but the brand’s European sales have languished horribly over the years and must have disappointed. Any improvement in Western Europe (and cumulative sales in the first seven months are actually down on last year) is clearly coming off a low base.

This feature published on just-auto a while back chronicled the brand’s problems in Europe and the options facing it:

Lexus' disastrous Europe adventure: can it be turned around?
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However, Lexus is looking much more like a credible competitor to brands like BMW, Audi, Jaguar and Mercedes-Benz in Europe these days and cannot be as easily dismissed as it once was. For one thing, topping customer surveys on reliability and satisfaction will be building a very solid reputation at a time when some other brands have been wavering in that area. Lexus is slowly expanding its dealer network too.

On the product front there have been some interesting developments also, with Lexus designs emerging that exude a self-confidence that wasn’t quite there ten years ago. The mix’n’match guide to automobile design (with an occasional big dollop of Toyota thrown in – see last GS300) appears, thankfully, to have been archived under ‘good idea at the time’. And diesel engines – a lack of which has been a serious handicap in Europe - are finally arriving too. The hybrid powertrain units offered are also a useful differentiator for the brand, even if take-up in Europe turns out to be low compared with the US.

Europe will be a tough nut to crack but Lexus seems to be getting its act together on product in a manner that will make it a credible player in luxury market segments. Whether by design or circumstance, Lexus is apparently playing a long game in Europe. That’s prudent perhaps, at this end of the market. In addition, record profit-making Toyota does not exactly need to pressure Lexus for rapid volume growth.

The competition from established luxury marques is very strong of course, but would you bet against Lexus gradually growing its European share (from its admittedly low base)? I don’t think I would. And I’d throw that formbook out.

FRANKFURT PREVIEW: Lexus to show hybrid GS and diesel IS saloons
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COMMENT 1:

One question I have, though, is whether anyone has ever linked this elusive concept of "heritage" to profits?  I can think of brands with no "heritage" that make lots of money in one part of the world or another (Lexus, Nissan, Peugeot).  I can think of brands with lots of "heritage" that make no money anywhere (Jaguar, MG, Alfa Romeo, Lancia).  And I can of course think of the counter-examples, too: brands with "heritage" that do well (Mercedes) and those without that do poorly (Daewoo - past tense).

But don't know how to define heritage well... if a company is just plain old, does it have heritage?  Is heritage linked to racing only?  Rallying?  Does it have to win a lot, or just enter a lot?  How long does it last?  (Is Aston Martin still milking James Bond movies from the last century?)  Does it cover all models of a brand (Mercedes?) or only some (e.g. Evo within Mitsubishi, Corvette within Chevrolet).  Does it depend on the geography of the beholder as it were?  (E.g. Cadillac has buckets of H in the USA but it does not seem to carry over to Europe; Alfa has lots of positive H in Europe but in the USA its H means mostly "breaks a lot.")  Can you manufacture it?

COMMENT 2:

Interesting piece on the LS400. As you say, Toyota's target was the US market and the whole saga shows just how spot on Toyota's product planners were.The one thing I admire about American citizens is their awareness of value for money. Toyota wanted to get into the luxury sector, and they understood that if they produced a car that was better in terms of quality and reliability, and cheaper than the competition, then regardless of brand value and history, Americans would buy it. Without any of the glamour of Mercedes or BMW, or the loyalty to Cadillac or Lincoln, the Lexus 400 was outselling all of them put together within 3 years of launch.

In terms of engineering quality there was nothing to touch it. Strong men at Mercedes have been known to dissolve into tears when confronted with a stripped down Lexus. I remember talking to a valve train engineer at Ford who said they couldn't produce components like that in a toolroom, let alone mass production.

The European strategy was equally smart. In the first 3 years, Toyota's quota was only 2000 cars per annum. In the first place they couldn't keep up with US demand, but in any case they had accepted that in Europe prejudice would play a big part. Few would want to be seen in a Lexus rather than a Mercedes or BMW. Also they were much more concerned with growing Toyota sales and the concept of a Lexus being like a Toyota but better was the last thing they wanted. They were also reluctant to sell Lexus from Toyota dealers but the cost of independent outlets with such a limited supply did not make sense. They limited the quota, put a high price ticket on it, and left the European market time to appreciate and come to terms with the marque.

Now Lexus has a range of vehicles and an established reputation, they are in a position to make a serious move into Europe. The one thing that Toyota has never managed to do, or more likely has never chosen to do, is to make their products interesting or exciting. In terms of quality, reliability and fitness for purpose they cannot be beaten. On an objective basis you have to buy one. If you want character or excitement you would probably go elsewhere but Toyota has never been pressed by this. As they say a car of character is one that leaves you wondering when it will go wrong. Toyota, they just make the best tool for the job.

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If you want to add a comment or view on this subject can I suggest that you do it in a just-auto discussion forum thread that I have just created? There's more room there and I got the impression from some of the responses to the weekly mail that this was a subject of high interest (with some interesting points raised in the comments received above). Please click on the below left link and then 'Reply to Topic' at the bottom of the page . Thanks. Dave

Lexus - just-auto discussion forum thread


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