Lexus gets set to flex
BY MARTON PETTENDY | 13th Nov 2007
While the German Volkswagen Group brand has hogged the luxury market limelight by recording record growth since becoming a wholly owned factory subsidiary in 2004, including another projected (world-record) 20 per cent sales increase this year, the premium vehicle division of the world’s largest car-maker continues to stand between Audi and its march to global luxury market dominance.
Of course, that’s a battle that remains fiercely contested between BMW and Mercedes-Benz, despite the latter’s recent concession that sales supremacy isn’t everything, with Mercedes leading BMW 16,193 vehicles to 14,074 (when you include its 3462 truck and van sales) to the end of October this year.
Lexus and Audi may sell less than half as many vehicles as Mercedes and BMW (Lexus has sold 7090 while Audi has shifted 6295 so far this year), but the gap is closing more rapidly than ever.
In contrast to the 8.2 and 8.1 per cent sales growth of BMW and Mercedes respectively, Lexus and Audi sales are up 15 and 36 per cent respectively so far in 2007. Audi says it will sell more than 7000 vehicles for the first time (almost double its 2004 tally of 3700 cars), while Lexus will also shatter its target by finding more than 8000 new customers this year – a 5000-unit increase in five years and 1000 vehicles more than its target this year. It sold 1000 vehicles in a month for the first time ever in October.
It took Lexus more than eight years to overtake Audi in the luxury market sales race (in 2003) and, despite Audi’s recent growth, Lexus continues to hold a 1000-vehicle sales lead. Lexus says the key to its success is customer satisfaction, which Audi has also targeted as its primary focus, but to deliver the rapidly increasing number of new models to customers, the premium Japanese maker is about to roll out a new-look retail network that is expected to almost double from 22 currently (14 of them metropolitan) to beyond 40 by 2015 – many of them in regional areas.
As we detailed recently, the Lexus new model onslaught continues this month with the range-topping petrol-electric LS600hL and continues in January with a facelifted GS large sedan range (including the new GS460) and in March with the all-new LX570 SUV. F-badged V8 and coupe-convertible versions of the compact IS sedan will follow, as will a redesigned RX medium SUV in 2009, the top-shelf LF-A supercar the following year and an all-new sub-IS entry model beyond 2010. The Lexus range will eventually start from under $50,000 and approach $250,000 with the LS-h and LF-A.
Lexus says its dealers already achieve industry-leading vehicle through-put, but they are currently running at full capacity and to cope with the new model influx the first in a series of newly branded retail outlets will be opened in January 2008.
Heralding a new corporate image based on the dealership model that launched Lexus in Japan for the first time in August 2006, the plush new Lexus of Perth premises in Osbourne Park will be replicated in the short-term in Newcastle and Melbourne. Within 12 months Lexus will add up to five new outlets, with an extra 15-20 to be opened by 2015, when a total of at least 38 will be operational. Existing dealerships will be upgraded, relocated and/or joined by new outlets, with many new franchises offered to existing Toyota dealers.
“An expanded and upgraded retail network in a key part of our aggressive growth strategy, which is driven by growth but needs to be supported by wider representation in the short-term,” Lexus Australia chief executive John Roca told GoAuto. “Our larger retail footprint will be as important as the new models coming.
“Our business is about looking after two clients: our dealers and our customers. Cracker product is no good if you have a dud dealer network. “Customer service was what got us through when we had just a few cars in our range. Our competitors ask what it is we’re doing that they’re not. We’re envious of their product line-ups, but our day will come. It’s all about the customer. Customer satisfaction is our core DNA,” said Mr ROca.
GoAuto has toured Tokyo’s premier Lexus dealership, which raises vehicle retailing to new levels and will be the blueprint on which Australian Lexus dealerships will be modelled. Upon entering its glass-fronted, white-tiled confines, customers are greeted by the scent of floral and sandalwood aromas pumped through the air-conditioning system, before being directed to one of five finegrain wood-lined service consultation stations or one of five sales desks, separated by rice-papered glass partitions, each with large flat monitors for displaying paint and trim colours, and specifications.
Sales staff in Japan are trained to open and close doors for customers in the traditional Samurai manner, as well as to stop traffic when a client leaves the dealerships before bowing until the customer is out of sight – a practice that won’t be replicated in Australia.
Taking pride of place is a black-themed “flagship area” which features top-shelf models like the LS and SC under variable lighting and surrounded by sofas trimmed in the same double-stitched leather that can be specified in the vehicle displayed.
Out the back is an area from which customer can view their car being serviced in one of the six naturally-lit, open-air workshop bays (each with post-less hoists) or in the dedicated hybrid vehicle service station. Each bay is serviced by two technicians, each of whom use a compressor and rattle gun-equipped trolley for rapid wheel removal.
Mr Roca said innovations like a four-year warranty period, IS or RX loan vehicles, the Encore program and a “second delivery” service to familiarise customers with features like sat-nav and Bluetooth phone set-up don’t necessarily come at the expense of profit margins.
“Five years ago people were approaching Mercedes in their droves (for franchises). Now dealers are knocking on our doors. They have to deal with dissatisfied customers and we don’t have many. “Our dealers are very profitable and have to be so. We have targets. We’re definitely at the high end in terms of customer satisfaction and profitability. The industry benchmark for return on investment is three per cent and Lexus is right up there now.” But he admits that, as a relatively new player in the steadily growing luxury segment, established brands like BMW and Mercedes don’t share their pieces of the pie kindly.
“We’re happy to forego profit for market share. We’ve only just begun. Our ambition is to be up there with our competitors. There’s no reason we can’t dominate in due course, subject to product.”
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