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Lexus Beating Mercedes Shows U.S. Luxury a 3-Brand Race

Photographer: Akio Kon/Bloomberg

Executive vice president of Lexus Mark Templin said, “It’s nice to know that people are responding to the new products we’ve launched. Over the last two years, we’ve had a string of hits.” Close

Executive vice president of Lexus Mark Templin said, “It’s nice to know that people are... Read More

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Photographer: Akio Kon/Bloomberg

Executive vice president of Lexus Mark Templin said, “It’s nice to know that people are responding to the new products we’ve launched. Over the last two years, we’ve had a string of hits.”

Lexus is back in contention for the wallets of U.S. luxury vehicle buyers, after trailing its German competitors for three years.

Toyota Motor Corp. (7203)’s luxury marque outsold Daimler AG (DAI)’s Mercedes-Benz in May for the second time in five months and pulled within about 12,000 deliveries of market leader Bayerische Motoren Werke AG (BMW) so far this year. The gap may close further with the Toyota City, Japan-based automaker scheduled to introduce the NX, the Lexus brand’s first compact crossover, and the RC sports coupe to its lineup later this year.

“The volume is not the goal, it’s to do the right things,” Mark Templin, executive vice president of Lexus, said in an interview in Tokyo. “It’s nice to know that people are responding to the new products we’ve launched. Over the last two years, we’ve had a string of hits.”

BMW and Mercedes overtook Lexus in U.S. luxury auto sales after Japan’s March 2011 earthquake and tsunami disrupted production of almost every model in its lineup. Lexus is contending again with its German rivals after arming dealers with a revamped IS sedan and GX sport utility vehicle, even as the company draws a line against introducing entry-level models priced for less than $30,000, like Mercedes did with the CLA.

“Toyota’s made the argument Lexus isn’t going to go down market,” Christopher Richter, a Tokyo-based auto analyst at CLSA Ltd., said by phone. “There’s a case for it, because by having cars like that you run the risk of diluting and lessening your brand.”

Winning Streak

On a retail sales basis, excluding vehicle purchases by businesses, Lexus was the top-selling U.S. luxury brand in the first quarter of 2014, said Tom Libby, an analyst for IHS Automotive. Lexus sold 65,475 cars and SUVs to individual customers in the period, compared with 63,483 for Mercedes and BMW’s 63,353, according to IHS’s data.

When BMW and Mercedes both outsold Lexus in 2011, the two automakers ended an 11-year streak for the Japanese luxury brand as the top seller in the U.S. premium market. The next year, Lexus trailed Mercedes for the No. 2 spot by about 30,000 deliveries, and in 2013 its gap with BMW, the new second-place brand, widened to more than 35,000 units.

Toyota builds every Lexus model in Japan except for the RX SUV and ships those vehicles to the U.S. market. The 23 percent decline in the yen against the dollar over the past two years has boosted earnings from those exports.

The combination of U.S. sales growth and a favorable yen-dollar exchange rate is putting Lexus on a path back to its mid-2000s profit peak, Jeff Bracken, general manager for the brand’s largest market, said in April.

While Toyota has said Lexus won’t top its 2007 record of almost 330,000 deliveries in the U.S. market this year, the brand is expanding from last year’s global all-time best of more than 523,000 vehicles sold.

Toyota’s American depositary receipts rose 0.5 percent to $115.15 at the close in New York. They have slid 5.6 percent this year.

To contact the reporters on this story: Craig Trudell in Tokyo at ctrudell1@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Chua Kong Ho, Garry Smith

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