Russia, Lexus’ number one market in its European region, might be down, but UK sales are up strongly. On balance then, 2014 has been a good year, according to the brand’s Head of Europe. Next, he promises more hybrids but no diesels. Why?
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The UK has been a big success story in 2014. What’s been driving that?
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Also in the room is Lexus UK’s MD Richard Balshaw, who answers:
It’s our fourth consecutive year of growth but you have to consider that this followed quite a large fall after the financial crisis. This year will be the first full year for the new IS so that is another factor. Up to the end of October we were up 25% year on year and 52% compared to October 2013. And that’s before any NX sales. NX will carry us to a slightly higher growth rate by the end of 2014.
Would you say 2015 will be a record year for Lexus in the UK?
RB: More likely 2016.
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By GlobalDataWhy not next year?
RB: The NX is a big hit worldwide so there is some supply restriction on it, and there are more models coming into the range in 2016. Our previous record was 15,200, set in 2007.
How is the year for Lexus so far across those combined 56 markets which TME defines as Europe?
AU: This year we should be able to reach 52,000-53,000 units. Next year will be about 60,000 and for the whole of Europe this should be a record year. This is provided that the Russian market remains stable: it’s a bit shaky at the moment, consumer confidence is a bit difficult.
Russia being your number one market, what is the best selling model?
Today, it’s the RX. Tomorrow, it will be the NX.
What makes you say that?
Because I planned it [laughs]. No, because we have made some studies and we know that the buyers there love our larger SUV, and they are attracted to the brand, and so on. The NX will not just be the best selling product in Russia next year, it will be the best selling product in the whole of Europe. If we sell 60,000 cars, 23,000-24,000 of these will be NX.
You have one problem though: the RX now looks dated beside the NX.
OK, the RX will not stay on the market for another 25 years. I can’t tell you when it will be replaced but I will say this: we expected a little bit of cannibalisation but it’s not the case.
There is a big difference in the size of the RX and the NX. Some people need the space in the back of the car, maybe they have grown up kids, they need some more luggage space and so on. For these customers, the RX is their car. I don’t want to exclude the fact that some RX customers will switch to the NX but don’t forget that the bigger car also has a lot more power than the new NX 300h. In fact, in the last two months, RX sales have gone up and this we know is from people coming to the showrooms to see the NX and then realising that the RX is better for them.
There’s going to be a big push from Volvo next year once XC90 production starts in late January. Why doesn’t Lexus Europe have a rival model ready in markets outside Russia?
You know in Russia we sell the LX mainly as a five-seater. It’s not so much the ability to transport many people but the prestige of the vehicle. Maybe yes, in the US, some people do want a seven-seat SUV but in Europe, not so much. If you look at the sales of all seven-seat vehicles, it’s a niche market.
We could try to sell the LX in Western Europe but let’s be honest, CO2 is the name of the game. But in Russia, it works. It’s body-on-frame, you can go anywhere in it – it’s invincible. So, different countries, different customers.
Why do you think the GS has failed in Europe?
I don’t agree. You have to consider that this is a very upmarket car. The GS 450h has 350 horsepower. If you look at the E premium segment, at cars with this much power, you would see that we have a very good market share.
RB: In the UK, 450h is 25% of GS sales.
AU: The 450h is a sports car that looks like a limousine.
Sure. So why doesn’t the four-cylinder GS 300h sell well then?
Well it sells but in many countries if you look at the user chooser buyers, they very often have a diesel-only policy. We want to change this, and we are working on this. Don’t also overlook the fact that this past summer BMW was offering the 5 Series for the price of a 3 Series.
RB: In the UK, we’ll do 700ish this year (of the 300h) compared to less than 100 of the GS 450h. So from our perspective that’s a success. For us, it’s strong growth.
The LS is a rare sight in Europe. Why not abandon this segment?
Well, it’s a car with a V8 engine, it’s got 450 horsepower. If you look at the number of S-Classes that are sold they are not in the category of 400+ horsepower. Look at the US: every month we sell a few hundred units of the LS. And also in Russia, we have a lot of customers for this car. It is not a car that is primarily designed for western Europe.
When will we see a small crossover, something below the NX?
My answer to that is it could make sense – this segment is huge. But first we want to expand in the segments where we already are, and then perhaps after that.
Fuel cell vehicles are an expensive, advanced and environmental technology. So why has TMC made its first model a Toyota, not a Lexus?
Hybrids started with Toyota in 1997 in the US and 1998 in Europe. It was not exactly a sports car, the first Prius. if you take a premium car, people will always expect a high level of performance and this is not what fuel cell cars are about.
You say that, but Daimler will soon be selling the B 200 f.
Mercedes-Benz will have this hydrogen B-Class but it will not be a performance car. A Lexus cannot be a car where there is just minimum performance. A Lexus must always be much more than this.
What about plug-in hybrids? Why does Toyota have these but not Lexus?
This issue is the range. Hybrid cars work very well but they are more expensive to develop and then of course for the customer to buy. In Europe, the extra cost of the Prius PHEV is 9,000 euro. So you will realise that we sell just a small quantity of these. These cars only work in the countries where they are subsidised. But even in the UK where the subsidy is 5,000 pounds, it’s not what I would call a massive success. The same applies to Ampera and others. The issue of not having a place to recharge the car is still a problem for a lot of people. But the infrastructure is getting better so let’s see what comes in the future.
