Lexus Splits With Germans, Shuns Sub-$30,000 Luxury Cars

Toyota Motor Corp. (7203)’s Lexus, no longer the top-seller of luxury vehicles in the U.S., will make reclaiming leadership tougher on itself by choosing not to chase German brands introducing cheaper cars, an executive said.

New entry-level vehicles such as Daimler AG (DAI)’s $29,900 Mercedes-Benz CLA are a primary reason that sales of premium autos have accelerated faster than the total industry this year, said Jeff Bracken, group vice president and general manager of the Lexus division. Volkswagen AG’s Audi unit plans to introduce an A3 sedan next year that will match CLA’s price.

“Some of our competitors have gone down below $30,000,” Bracken said in an interview today in Detroit. “For Lexus, we won’t be doing that. That is not part of our strategy.”

Lexus, which ruled the U.S. premium segment for 11 years through 2010, has fallen behind Bayerische Motoren Werke AG’s BMW, which led in 2011 and 2012, and Mercedes-Benz, this year’s frontrunner entering December. Lexus’s least-expensive cars include the CT hybrid, which begins at $32,050, and the IS sport sedan, redesigned this year and starting at $35,950.

Lexus posted a 13 percent increase in deliveries for November, helped by a 99 percent gain for the new IS, which was updated with a lower seating position, stiffer frame and a “spindle” grille that’s the new face of the brand. U.S. deliveries for the Toyota City, Japan-based company’s division climbed 12 percent to 239,090 during the year’s first 11 months.

Mercedes widened its U.S. lead over BMW in November as sales of the new entry-level CLA coupe contributed almost all of its monthly gain.

Wider Lead

Deliveries for the unit of Stuttgart, Germany-based Daimler climbed 14 percent through the year’s first 11 months, extending its lead over Munich-based BMW to 7,610 vehicles. BMW’s entry-level coupe, the 1 Series, starts at $31,500.

The German automakers’ results don’t include Daimler’s cargo vans and Smart cars or BMW’s Mini brand, which aren’t luxury vehicles.

Lexus trails Mercedes by 40,411 and BMW by 32,801 vehicle deliveries this year through November. The brand probably will finish 2013 with about 270,000 sales, up from 244,166 a year earlier, Bracken said.

“We have not yet locked in exactly what that number will be for 2014,” he said. “We’ll be bumping up right against 300,000.”

While Lexus expects higher sales for 2014, it may continue to trail Mercedes-Benz and BMW because of its decision to avoid chasing its German competitors on entry-level vehicle prices. The Toyota and Scion brands “represent sub-$30,000 price points appropriately,” Bracken said.

“I would love to be the luxury leader again, but I think it really makes it difficult, because clearly there is more volume” of sales for vehicles priced less than $30,000, he said. “And since we are not going there, it just makes it even that much more difficult for us.”

To contact the reporter on this story: Craig Trudell in Detroit at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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