Lexus Seeks To Overcome BMW and MB

DETROIT January 15, 2004; Norihiko Shirouzu writing for Dow Jones reported that Toyota Motor Corp. wants to expand its Lexus brand significantly by beefing up a sporty entry-level luxury model and possibly adding to its product line a couple of vehicles priced above $70,000 that would put Lexus in direct competition with DaimlerChrysler AG's Mercedes-Benz and BMW AG.

Denny Clements, head of the Lexus brand and a senior executive at Toyota's U.S. sales unit in Torrance, Calif., told The Wall Street Journal he couldn't be happier with the way his brand is performing. Lexus sold 259,755 vehicles last year, up 11% from 2002.

Mr. Clements is aiming to boost Lexus's annual sales to 350,000 vehicles within the five years, though its sales this year are likely to show only a modest increase at best.

Still, he said unleashing an assault on BMW's near monopoly on younger buyers with its 3-Series cars and Mercedes' equally strong grip on consumers buying luxury cars priced above $70,000 "should give us a huge opportunity to grow Lexus."

He noted Mercedes has a dozen model variants that are priced over $70,000, while Lexus has none. The brand's flagship car, the LS430 sedan, starts around $ 54,000. Mr. Clements said recent Lexus surveys have shown its customers are interested in buying higher-priced vehicles, and in some cases leaving Lexus to buy Mercedes cars. "So we are asking [Toyota's product planning office in Japan] for more product offerings at the higher end," he added.

Mr. Clements declined to be specific about what type of super-luxury vehicles he is looking for, but noted that among them are "a sedan" and "a sports car."

In the entry-level luxury segment -- which has been growing as vigorously as the segment for $70,000 or above luxury cars -- Mr. Clements said Lexus is looking to offer more body styles and other variants for the redesigned IS car in an effort to dislodge BMW's near monopoly on sporty, entry-level luxury-car buyers. Lexus hasn't said exactly when the redesign IS would arrive in dealer showrooms, but one Toyota official said it should come within the next two to three years.

Mr. Clements noted BMW sells about 10,000 3-Series cars a month, which he said are offered in several body styles, including convertible, and with powertrain and other options. "A half of those sales are coupes, and I don't even have an IS coupe in my lineup," he said.

Currently, Lexus offers two IS models -- a sedan and a hatchback. "We need for sure a coupe, a convertible and a sedan with multiple powertrain offerings," said Mr. Clements. He went on to say, "It's important for us to be competitive in the entry-level luxury segment" to capture those 30-something consumers who are buying BMWs. "Those are young professionals that are going to be luxury-car buyers for the rest of their lives."