Armed With New Models, Lexus Targeting Share Gain in 2009

Special Coverage

North American Int’l Auto Show

DETROIT – With industry new-vehicle sales having fallen 18.0% in the U.S. in 2008, and most forecasters this year calling for more of the same – or worse, not many auto executives appear as confident and upbeat about 2009 as Lexus General Manager Mark Templin.

“We’re really excited about this year,” Templin says in an interview, pointing to the launch of three core products in 2009, including a revamped RX cross/utility vehicle due in February, the IS convertible slated to bow this spring and the new HS 250h dedicated hybrid-electric vehicle that should hit the U.S. market this summer.

“There’s always something fun to talk about (in 2009),” he says.

Templin won’t predict volumes for this year because of the continued uncertainty over industry-wide demand, but he does say he expects Lexus to gain share in the U.S.

“Overall the forecasts we get from economists are so widespread as to what the market is going to look like, it is really hard to tell,” he says. “We think the market will be somewhere between 11 (million) and 12 million (vehicles).

“(But) we’ll try to make sure we’re growing share whatever (the market) turns out to be.”

HS 250h gives Lexus a trio of entry-level luxury sedans.

Lexus sales totaled 260,087 units in the U.S. last year, a 21.0% drop from 2007. And though the brand was able to maintain its 2.0% industry share, Templin says he was shocked by how much the stumbling economy impacted the normally recession-resistant luxury-vehicle sector.

“I think everybody was surprised that nobody was immune to what went on in the marketplace,” he says. “The luxury market dropped just as much as the mass market did.

“We felt very good about what we were able to accomplish in 2008. We got through (the year) without any core product launches, and we were able to maintain the same share we had in the prior year. So we felt good about that.”

Dealers, which in 2008 were slated to wrap up a 3-year, $1 billion spending spree on new and upgraded facilities, are doing some handwringing over the current sales environment, but they continue to show faith in the brand, Templin contends, adding “nearly all of them” are profitable.

“I think all dealers are concerned, no matter what brand they represent, because of the marketplace that they face,” he tells Ward’s. “But our overall dealer body is healthy and profitable and we’re not at risk of losing any dealers.

“They see what we have coming, and they’re really excited about the direction we’re taking the brand.”

However, Templin says dealers are holding off on new investment where possible and leaving no stone unturned when it comes to slashing costs. Lexus will help them rein in travel expenses by holding regional sales meetings this year instead of one national event, for example. But the auto maker wants dealers to be careful not to “cut any of the muscle” along with the fat.

“We’re going to make sure we don’t back off one bit from the loaner cars, the free car washes, the free coffee and all the things that we’ve done for our customers,” Templin says. “We’re not giving up on any of that.

“While other people look at those things as expenses, we’re not cutting anything that touches the customer.”

The new HS 250h that debuted here at the North American International Auto Show is Lexus’ first hybrid skewed toward maximized fuel economy rather than performance and its first model with a 4-cyl. engine. It will add ammunition to the brand’s entry-level sedan lineup that already includes the demographically disparate IS and ES models.

“You’ve got the Baby Boomer, who wants a luxurious ride who buys the ES. Then you’ve got the buyer we’re trying to reach with the IS, who wants a more performance-oriented driving capability,” Templin says, adding The Age gap among purchasers of the two cars ranges from 15 to 20 years.

“Now we’re adding the HS to that lineup and having a trio of cars in that segment that really complement one another. So we should show really good numbers in that segment.”

Lexus is forecasting HS 250h sales of 30,000 units in the first full year, but Templin says dealers are more bullish, and the auto maker could make more if demand exists.

“(But) in today’s environment, we better err on the cautious side,” he says, adding Lexus will make money on the new hybrid.

Some analysts contend the luxury-vehicle market may have peaked as a result of the financial crisis and subsequent recession that may have a long-lasting effect on conspicuous consumption. But Templin is confident the sector will bounce all the way back and then some.

“We always felt like, long term, the luxury industry will grow more than the mass market will. And we still think that is the case,” he says. “The only question is how long until the economy is in the kind of shape that allows us to grow like that again. It may be two or three years before we start to start to see the kind of growth we had envisioned.”

Despite the uncertainty over the length of the trough, Lexus isn’t curbing investment in new products.

“We haven’t slowed down on the product side at all,” Templin says. “And we want to make sure we don’t. Product is king.

“As soon as you start delaying things, you leave gaps in your lineup and take on a lot of other complexity. If anything, there are some products you would like to bring forward to help you in that difficult market.”

This year, Templin predicts, luxury-market strength will lie with smaller cross/utility vehicles, such as the revamped RX and Mercedes GLK, and entry-level sedan sector where the HS 250h resides.

“There are a lot people who aspire to drive luxury goods, and the lower end of the luxury brands are probably the ones that are going to grow the fastest,” he says.

Meanwhile, Lexus’ strong product rollout won’t leave the cupboard dry for 2010, Templin promises.

“I think we’ve got good plans for the future,” he says.

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