In the 1970s or even the early 1980s, the phrase “Japanese luxury cars” would have been considered the ultimate oxymoron.
Japanese automakers gained their foothold in the U.S. during the oil crises of the 1970s and recession of the early 1980s when consumers were clamoring for small, inexpensive fuel sippers, and U.S. and European automakers had little to offer in that department.
With those crises behind them, the U.S. enjoyed a booming economy and a skyrocketing stock market, both of which led to the emergence of a young generation of affluent up-and-comers, who became known as yuppies. Their tastes in cars shifted from utilitarian and thrifty to luxury and performance. In fact, the BMW 3-Series seemed to become the official yuppie car. Indeed, sales of BMW along with Mercedes-Benz and Audi soared as they captured the fancy of the growing number of Americans who could afford more upscale transportation.
Japanese automakers, by then firmly entrenched in the U.S. marketplace, took note of the changing buying patterns and began developing vehicle for this new buyer group. However, they found, because they had come from more humble roots of small, inexpensive and, in some cases, spartan vehicles, they opted to form new nameplates with their own car lines and own dealerships to sell their new luxury cars. Honda pioneered the way with Acura; Toyota’s Lexus and Nissan’s Infiniti followed shortly thereafter. Initially, critics pooh-poohed the notion of Japanese luxury cars, a phrase no longer an oxymoron.
Acura: Pioneering Japanese luxury
Honda had broken ground in 1981 for its Marysville, Ohio manufacturing plant, when company executives spotted the shift in American buying patterns. The young professionals who had made Honda a success by purchasing a Civic for their first car and graduating to the larger, more expensive Accord were enjoying higher incomes and building wealth. But Honda offered nothing for them. Instead, they left for luxury and performance cars from the German automakers.
Honda had on the drawing board a new, larger sedan. It was to be bigger than the Accord, be equipped with Honda’s first V-6 engine and be loaded with luxury features. It also would offer a more spirited driving personality. Honda executives saw it as the car to keep upmarket intenders in the family.
But Honda wasn’t convinced it could sell a luxury vehicle through its established distribution channel, which then was marketing a trio of cars the - Civic, Accord and Prelude – all for under $20,000. Blazing a new trail for all Asian makes, Honda took the additional step of creating a separate division with its own line of cars and own dealerships to sell what would be called Acura automobiles, beginning in 1986.
Almost overnight, Acura became a success, quickly surpassing sales of Mercedes-Benz and BMW vehicles. In its first full year of sales in 1987, Acura had total sales of 109,000 cars. Of those, the flagship Legend sedan accounted for 55,000 sales and the rest were of the smaller Integra, Honda’s insurance policy in case the Legend flopped. By 1990, Acura was selling 138,000 vehicles, including 54,000 Legends. That same year, Mercedes sold 78,000 cars; BMW and Lexus each sold 64,000.
Despite a strong start, Acura hit some bumps in the road. Toyota and Infiniti launched their own luxury marques, waking up German automakers, especially Mercedes-Benz, who countered in kind with new models and new pricing.
At the same time, Acura seemed to suffer an identity crisis along with lower sales. Its model line was a hodge-podge of models, ranging from the exotic NSX sports car introduced in 1991 to the entry-level Integra. By 2003, sales had stalled at 1994 levels. Acura’s first move to address the problem was to copy the Germans by dropping names like the much-loved Legend, Integra and Vigor and replacing them with alphanumeric monikers.
Acura followed with the freshening of its line and adding new models. Most significantly, Acura replaced the slow-selling Isuzu-built SLX with the MDX, based on the Honda Odyssey minivan. The MDX become one of the earliest, car-based, three-row crossover SUVs, a genre that is predicted to grow dramatically in the coming years. In its first year, the MDX added 50,000 sales.
Acura then introduced more models that emphasized sexier styling, cutting-edge technologies and spirited driving dynamics, including TL sedan, the flagship RL, the smaller RSX and the upcoming RDX crossover. Acura was willing to drop slow-selling models as well, like the wedge-shaped CL coupe, for instance. And even today, Acura is still hounded by critics who insist a true luxury marque should have a V8-powered, rear-drive sedan as its flagship whereas the RL is all-wheel drive and V6 powered.
Nevertheless, Acura, which is celebrating its 20th anniversary this year, is making a comeback. Last year was a record-setting year with sales just shy of 200,000 vehicles. The TL alone, Acura’s best-selling model and, as Acura claims, America’s best-selling luxury sedan, had sales of nearly 78,000.
Showtime Detroit: Lexus and Infiniti debut
In Detroit, dealer organizers of the local auto show decided to reinvent their event and create an international show, now known as the North American International Auto Show. The international show made its debut in 1989, and the stars of the show were two new nameplates – Toyota’s Lexus and Nissan’s Infiniti – along with the worldwide unveiling of their first new models, the Lexus LS 400 and the Infiniti Q45.
Lexus: A star is born
At Toyota, Chairman Eiji Toyoda and other top managers decided in a secret 1983 meeting that it was time for Toyota to create a top-level luxury car. By fall 1984, the project, codenamed F1, was well underway. Research over the next couple years included focus groups and dealer interviews in major U.S. markets along with lifestyle studies and development of design concepts suited for Americans. In January 1988, Lexus and its L log were unveiled at the Los Angeles show; teasers were dispersed through the rest of the year at various auto shows. In 1988, the first 80 dealers, who had gone through a demanding selection process, were named, the design for the dealershipswas unveiled, and ground broken was broken on the first dealership – one in Columbus, Ohio.
At the auto show, the LS 400 made its debut. The car went on sale in September, with almost 3,000 sold in the first month. Lexus first full year of sales in 1990 hit 60,000 cars, surpassing Toyota’s goal by 3,000 units.
Lexus suffered some bumps in those early days. Lexis, a legal information firm, sued Toyota over the Lexus name; the suit ultimately was resolved in Toyota’s favor. A couple of quality glitches prompted a high-profile service campaign. However, rather than being a negative, Lexus quick move on the problem was turned into a positive.
By 1991, Lexus had become the No. 1 selling luxury import, selling more than 70,000 cars a year, more than Mercedes or BMW. After that, it was record after record set – every month and every year higher than the previous one -- and milestone after milestone set – the first half-million, million than 2 million Lexus models sold. By 2000, a year after its 10th anniversary, Lexus had become the best-selling luxury nameplate in America. Lexus also set new levels of quality and customer service as well, topping the J.D. Power and Associates surveys yearly for more than a decade.
Along the way, Lexus expanded its product line to include cars, ranging from the entry-level ES and IS to the flagship LS with the midsize and sporty GS in between. It added the ground-breaking RX crossover, which became the first U.S.-built Lexus, and larger, more traditional sport utilities, like the LX and GX. It has recently introduced hybrid versions of some models. Lexus introduced the first certfied pre-owned vehicle program in the industry.
Infiniti: A “rocky” road
After years of studying and planning, Nissan opened the doors of its first 51 U.S. Infiniti dealers in November 1989, about a month before its flagship Q45 was to be introduced at the Detroit show.
Infiniti launched the brand with a still-famous advertising campaign that showed roads winding through trees and rocks. The ads, which were intended to mirror the Zen-like ambiance of Infiniti dealerships, were the fodder for many jokes as it appeared they were selling rocks and trees, not cars.
Nevertheless, the Q45 earned immediate praise from the enthusiast press for its breakthrough combination of performance and luxury as well as its innovative styling. At the same time, the Lexus LS 400 was viewed as a Mercedes-Benz knockoff. (Infiniti also sold the less expensive M30 performance luxury coupe alongside the Q45.)
Like Acura and Lexus, Infiniti achieved some immediate sales success and set high standards for customer pampering and quality in J.D. Power surveys. But, in the midst of Nissan’s financial woes, Infiniti appeared to lose its way. Its flagship Q45 was redesigned, losing the edge and sportiness of the original. Other models, particularly at the lower end, also lost the original performance spirit of Infiniti.
That all changed with arrival of Carlos Ghosn to head Nissan. He demanded designers create head-turning designs for both Infiniti and Nissan, and first up for Infiniti was the G35. The eye-catching G35 is the most successful Infiniti in history and is the luxury marque’s volume leader, representing one of every three Infinitis sold. As Ghosn pointed out recently at the New York auto show, the G35 laid the foundation for Infiniti’s recent success -- four straight years of record, profitable sales and a 55-percent increase in sales since 2002.
More stylish new models with spirited performance and cutting-edge technology in front-, rear- and all-wheel drive followed the G35, including the snazzy FX sport utilities and the V8-powered M45 and V6-equipped M35 sedans, which have been winning rave reviews from the automotive press since going on sale in February 2005. The M achieved a milestone when the M45 ranked first among eight midsize luxury sport sedans, including BMWs and Mercedes-Benz models, by Car and Driver, representing a first for a Japanese maker.
Now comes Act II or III. Infiniti is revamping its entire line, beginning again with the G35, which was unveiled as a sedan in New York and goes on sale in November. coupe follows in 2007; a concept version was revealed at the Detroit show earlier this year.
Infiniti also is doing its second round of dealership makeovers. And Infiniti is going global, expanding to the Middle East, South Korea, Taiwan, China and Russia in the next three years.
Too much success: U.S. threatens sanctions
While critics initially discounted the Japanese automakers as capable of building luxury cars, they soon became a significant threat to competitors, to the point that the U.S. government threatened sanctions.
On May 16, 1995, then U.S. Trade Representative Mickey Kantor announced the U.S. would impose trade sanctions against Japan, targeting 13 Japanese import vehicles for 100% tariffs valued at $5.9 billion annually. Those targeted vehicles included all Lexus models, Acura’s Legend and TL and Infiniti’s Q45 and J30. The AIADA immediately unleashed its four-prong lobbying and public relations campaign designed to reach the Administration, Congress, the media and the public, hitting hard with the message that sanctions would devastate American businesses and jobs. Following weeks of effort by dealers nationwide, then President Clinton announced at month later that the two countries had reached an agreement – ending the threat of sanctions. The effort marked one of the biggest battles AIADA and its members have ever fought.
Today, Japanese luxury cars – trucks, sport utilities and crossovers – are common lingo in the American lexicon and are mainstays of the U.S. vehicle landscape.