Lexus U.S. Growth Moving Toyota Luxury Brand Back to Peak Profit

While Toyota Motor Corp. (7203)’s Lexus lost its title as the top U.S. luxury line in 2011, there’s a silver lining: U.S. growth and a favorable exchange rate are taking Lexus back to its mid-2000s profit peak.

Lexus sales in the first quarter increased 15 percent to 65,085, putting the company on pace to top its full-year target of 290,000, Jeff Bracken, U.S. general manager for Lexus, said yesterday in an interview at the New York International Auto Show. Toyota, which doesn’t disclose profit by division, still won’t top its U.S. record of 329,177 sales, set in 2007.

“We’re not there, but we are certainly moving quickly toward the profit success we had in the past,” Bracken said. “The currency exchange is in our favor, and our volume is likely going to be back over 300,000 this year.”

Toyota’s luxury brand, created in 1989, boosted the Toyota City, Japan-based company’s U.S. earnings with models selling for an average of more than $40,000, or about $10,000 more than the average Toyota. Bayerische Motoren Werke AG’s BMW and Daimler AG’s Mercedes-Benz have both outsold Lexus for the past three years, after ending its 11-year streak.

With most Lexus models built in Japan and exported to the U.S., the brand’s profitability is directly affected by exchange rates. The yen, now at 102.44 to the dollar, has fallen by 4.2 percent in the past year, enhancing the value of Lexus’ U.S. sales.

Growth for the brand will accelerate in the final months of 2014 with the addition of the new RC sports coupe and NX compact crossover, Bracken said. The NX makes its debut in Beijing this week, and will be on display at the New York show next week for the public days, he said. U.S. sales of that model should average at least 25,000 a year, Bracken said.

“And 25,000 is a minimum estimate of what we’ll do in the U.S.,” he said. “Securing more production will be my challenge, because I think we’ll exceed that.”

Toyota climbed 0.8 percent to 5,554 yen at 9:35 a.m. in Tokyo as the benchmark Topix Index rose 0.3 percent.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net Chua Kong Ho

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