Without halo car, execs flesh out plans to get emotional
Lexus' 552-hp V-10 halo car, the LFA sports coupe, drives into the sunset at an awkward time for the luxury brand.
During the LFA's 2-year production run, which ended Dec. 14, it was positioned as the ultimate expression of Lexus quality and performance -- and carried a $375,000 sticker to match. The limited edition of 500 hand-built units sold out even before production began in December 2010.
But as Lexus struggles to reinvent itself as an emotional, pulse-pumping brand, the lineup loses the head-turning speed demon that spurred the image makeover in the first place.
Lexus executives concede they need a new halo.
"If we want to build a more emotional brand, then we need a halo car," Lexus Executive Vice President Kazuo Ohara said in a Dec. 17 interview. "We would like to have that sort of car."
But don't expect another rarefied supercar -- at least not with the same stratospheric price point. In the post-LFA era, Lexus has different ideas for generating youthful excitement from the traditionally staid premium marque.
And a big part of that means winning oohs and aahs from nonhalo cars that are within the reach of mere mortals -- cars that can actually be spotted on city streets, not simply preserved in climate-controlled garages by uberrich collectors.
Executives say the new, more emotional Lexus will cue off:
• More impassioned design
• New drivetrains
• Better customer service
• Sexier marketing.
The change has only begun, starting with the redesigned GS sedan that debuted in early 2012. The overhaul could power Lexus' U.S. sales back above 300,000 units in two or three years, said Mark Templin, the brand's global marketing chief.
Lexus' U.S. sales peaked at 329,177 in 2007. This year, volume climbed 23 percent to 213,559 through November. But in 2011, Lexus lost the U.S. luxury sales title it held for 11 years, and it still trails German rivals Mercedes and BMW.
If the overall market climbs to around 16 million, Lexus should once again eclipse the 300,000-unit mark, Templin said.
"I think in the next 2 to 3 years you'll see those kind of numbers again," he said. "There's the potential for that."
Enlivening the Lexus image is key to getting there.
Coupes and powertrains
In product, Ohara said, the brand is "seriously considering" a new coupe. Lexus will also lean on the next-generation IS sedan and new designs inspired by such concept cars as the LF-LC 2+2 sports hybrid and the LF-CC coupe to jumpstart the brand.
Lexus will also update its powertrain offerings.
The current round of model redesigns started this year with the GS and LS sedans and continues with IS next year. But the new cars use mostly carryover engine technology. That will change.
"We are now working to prepare a new generation of powertrains," Ohara said. "We are a little behind in carbon dioxide regulations. U.S. customers still prefer bigger engines, but the Europeans are downsizing dramatically."
He declined to give details but suggested downsized engines might be an option for some nameplates.
In October, Toyota announced plans for new direct-injection engines for certain hybrid models and a downsized 2.0-liter turbocharged engine. Direct injection will first be deployed in a 2.5-liter engine for hybrids next year. The 2.0-liter downsized turbo, which takes the place of a normally aspirated 2.5-liter engine, will debut in 2014.
Toyota has not said what cars they will appear in. But the improvements could be applied to the Lexus lineup. Ohara and Templin said that one option might be introducing the new powertrains as part of a midcycle re-engineering of recently redesigned models.
Over the next couple years, Lexus also will expand its lineup of hybrid vehicles to 8, from the 6 offered today, Templin said. He declined to give a more specific time frame.
Finally, Lexus also may tap new segments, such as small crossovers. But executives declined to confirm speculation that the brand is planning a compact crossover below the RX.
The LFA drove into history this month when car No. 500, the last in its limited-edition run, rolled out of the Toyota City workshop where the cars are painstakingly built, one car a day.
The LFA was in the red from start of production in 2010. But executives said it played a key role in getting Lexus noticed.
"We got much more out of the LFA than I originally anticipated that we would," Templin said. "It energized people."
Still, there are no plans to replace it.
The brand's global marketing has shifted gears: Lexus doesn't prioritize conquest sales from its German rivals. The new game plan goes straight for a younger generation of buyers that hasn't even entered the luxury market yet. In essence, they have given up conquesting Audi, BMW and Mercedes.
"You don't see a lot of movement between brands in the luxury space," Templin said. "To capture a new generation of buyers, we have to be much more emotional in the way we appeal."
Lexus is delivering on its promise to build more exciting cars, some analysts say. But the fight for entry-level luxury customers is heating up, with Cadillac, Infiniti and Lincoln also setting their sights on the segment to end-run the Germans.
"Some of Lexus' core products weren't particularly inspired. But for the 1st time on a consistent lineup basis, the product reflects their aspirations," said Kurt Sanger, Tokyo director of the global auto team at Deutsche Securities. "On the youth component, we shall see. That is still a work in progress."
Service and stilettos
In customer service, Lexus also needs to up its game.
Years ago, Lexus pioneered such things as roadside assistance and loaner cars. But rivals have copied and closed the gap.
Lexus is rolling out new programs to differentiate itself.
Templin points to the new delivery and technology specialists Lexus now requires every dealership to have. The positions, added this year, serve as local go-to experts who tutor customers on the high-tech features packed into the cars. Said Templin: "That kind of better service can be emotional."
And watch for more emotion in advertising.
When Lexus first appeared in the United States in 1989, a TV spot famously touted its smooth ride by stacking a pyramid of champagne glasses on the hood of a running LS. Today, ads are as likely to tout sexy women as they are silky engines.
Case in point: The new Lexus all-weather-drive commercial. It features a leggy model in stiletto heels strutting down an icy sidewalk before seductively climbing in her man's Lexus LS.
"We never used people in our advertising before. Now, we are," Templin said. "It's not just about product, but how product makes people feel. We're creating emotion many different ways."
Lexus may get a tailwind from the yen's recent weakening against foreign currencies. For much of 2012, the yen floated below 80 to the dollar, pinching overseas profits on the made-in-Japan cars.
But it has weakened to nearly 84 yen recently, largely on expectations that the recent change in government in Japan will actively fight the higher yen to help the country's exporters.
The weaker yen -- if it continues -- may allow more flexibility on pricing and incentives as well as features and technologies.
"Hopefully we'll get into the position where we can afford the resources to do even more things for our customers," Templin said. "The biggest benefit of a favorable exchange rate would be our ability to bring more cars to market at a faster pace."