Lexus Likes Its Gradual Growth

TARRYTOWN, NY — Toyota Motor Corp.'s Lexus luxury vehicle division isn't in a big hurry to get where it's going.

“We believe in gradual, steady growth for our dealers,” says Mike Wells, vice president-marketing for Lexus. “We're not going to drop 300,000 cars on the market without the infrastructure to support them.”

At a press conference for the refreshed LS 430 here, Wells says Lexus has only 202 dealers. But he's not in a rush to create more outlets. “We have very good coverage around the country,” he says.

With an average sales volume of 1,150 vehicles per dealer and an inventory of barely a week for most models, Lexus wants to stay true to its heritage. “You're going to see continued growth without sacrificing customer handling and service,” Wells says.

Lexus dealers also are committed to that goal, he adds. “Our dealers are investing a half-billion dollars in expanding service capabilities.”

The LS 430 recently went on sale. Wells concedes the revamped model will have a substantially lower volume than last year, because cars are a smaller part of the Lexus product mix. SUVs will make up 65%-70% of Lexus' product mix this he says.

SUVs are helping to fuel Lexus and luxury-vehicle segment growth. Wells forecasts that the segment (as Lexus defines it) will total 1.8 million units in 2004, an increase of 5%-8% next year.

Lexus will capture about 18% of the segment this year and wind up with about 1.5% market share of the overall market, Wells predicts.

He says the luxury segment is less impacted by the current incentive mania than the market overall. However, the new LS 430 will carry the same base price that it did last year, even though it offers $2,170 more value because of added equipment. Wells says this isn't negative pricing, merely a competitive necessity.

He's confident the ‘04 LS 430 will conquest substantial sales from competitive European brands such as Audi, BMW and Mercedes. He is not concerned about competition from domestic brands, but notes that Cadillac has made a good comeback.

“Cadillac is clearly one of our competitors,” Wells says. “I hope domestics provide more competition and (become) key players in the (luxury) segment.”