Lexus Seeing Global Growth, Europe Enamored With CUVs, Hybrids

PORTLAND, OR – Lexus first branched out of the U.S. in 1999 by retailing the IS midsize car in Europe. But it has been a slow slog toward appreciable volumes in that region and others.

While still recording the bulk of its sales in the U.S., a top brand official says demand in other markets finally is building.

“We basically had our last two years be all-time records for us, not only here but in nearly every market we operate in the world, so we’re getting good growth in…Europe, China (and) throughout the Asia/Pacific region,” Matthew Callachor, divisional general manager-Lexus planning division for Lexus International, tells WardsAuto here in an interview.

Lexus sold 582,000 units globally in 2014 and is targeting 10% growth this year, says a Lexus U.S. spokesman.

A half-a-million units in annual sales still is roughly a third of what Audi, BMW and Mercedes-Benz tally in a calendar year worldwide, but Lexus has made no bones about the hill it has to climb against the German luxury makes, which occupy the top three slots in global sales.

Alain Uyttenhoven, vice president-Lexus Europe, told Just Auto last year it was “impossible to catch the German Three, worldwide,” so Lexus was aiming to become the fourth-best-selling luxury brand globally, which it was in 2014.

Callachor echoes that sentiment and notes history is an impediment.

“We’ve been around 25 years vs. 50-something years for some of those other manufacturers,” he says of Lexus’ status as a relatively new kid on the premium block.

“But what we’ve really seen with Lexus over the last couple years is pretty much consistent, sustainable growth,” Callachor says.

Beneficial to Lexus has been the global trend toward CUVs, says Brian Bolain, Lexus U.S. vice president-marketing.

“It’s rare to see one segment on fire globally,” Bolain notes. “I don’t really remember that ever happening in my career before, where everyone around the world is clamoring for the same vehicle.”

The trend is especially noteworthy in Europe, where buyers are moving away from station wagons as the preferred family hauler.

The year-old NX compact CUV is especially captivating to Europeans. It’s already Lexus’ best-selling model in the region by a wide margin, tallying 13,192 deliveries in the year’s first half, Toyota Europe says.

No.2 best-selling for Lexus in Europe through June was the CT 200h hybrid hatchback, with 5,107 units sold.

Thanks to the NX, it looks like Lexus European sales may finally surpass 60,000 this year. It is targeting that number and 100,000 deliveries by 2020. It wanted to sell 65,000 in 2010.

Europeans Taking to Hybrids

Hybrids also are a bright spot for the automaker in Europe, where buyers traditionally have favored diesels as an alternative powertrain.

Hybrids accounted for 62% of Lexus’ record 31,600 first-half deliveries in Europe, Toyota Europe says, noting in Western Europe 96% of the vehicles it sold there in the first six months were hybrids.

“Hybrid is becoming, to my point of view, a real alternative to diesel,” Callachor says of European buyers’ most preferred powertrain.

More stringent emissions regulations in Europe are making diesels a difficult proposition going forward, possibly why Lexus has not yet introduced a diesel engine in the region.

It is making turbocharged 4-cyls. available there, however, as well as in China, which penalizes larger-displacement engines in the form of higher taxes.

Lexus still is an importer in China and Callachor foresees the situation staying that way.

During the summer Toyota delayed a plan to build Lexuses in China, Reuters reported, saying a decision was expected this year on when production would commence but executives first want to get sales above 100,000 annual units. Lexus is expected to increase China volume 12% this year to nearly 84,000.

Callachor doesn’t see Lexus affected much by this year’s slowdown in luxury purchases in China, driven by a government crackdown on graft, although it’s worth noting the brand’s lower-priced models have been better sellers than higher-priced ones such as the flagship LS sedan.

“Maybe more exotic brands which stand out a lot more have seen more of an impact,” he says, adding many Chinese consumers simply are shifting their spending to nearby countries and importing luxury goods, including cars.

Lexus is sold in 90 of the world’s major automotive markets, roughly half the markets the Germans are in, meaning there is room to grow. For instance, Lexus isn’t available yet in Mexico, barring vehicles purchased in the U.S. and driven across the border.

But Callachor says Lexus doesn’t want to expand too quickly and outpace its dealers.

“We want to…make sure we’re ready for each step, so that our retail network can handle it. Customer experience has been a large part of the Lexus ethos…(and) we want to make sure we can continue to deliver, not only to the new customers but to the existing customers, all those things about the Lexus experience.”

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