Toyota's drive to win over European car buyers just gained a bit of tailwind. The Japanese giant's Lexus brand is ranked No. 1 for the sixth year running among British car owners in the annual survey of quality and consumer satisfaction published June 2, by J.D. Power and Associates. What's more, the top-ranked car overall is the Lexus IS sedan, which starts at around $42,000 in Britain.
The mothership didn't far badly, either. Toyota (TM) brand cars ranked fourth in the survey, behind Honda (HMC) and Volkswagen's (VOLK) Skoda unit, in a tight competition among the top five. That's good news for growth. "There is a strong correlation between brands at the top of the ranking and increased market share," says David Sargent, director of European operations for J.D. Power -- which, like BusinessWeek Online, is a unit of The McGraw-Hill Comapnies (MHP) -- in Guildford, England.
Toyota has toiled for a decade to achieve critical mass in Europe, its weakest global market. Now it's targeting ever more ambitious gains, especially in the battle for premium car buyers. The company aims to sell 65,000 Lexus cars in Europe by 2010 -- up from 28,777 last year. Toyota and Lexus together sold 964,208 cars in 2005, winning 5.1% of the European market, up from 3.7% in 2000 -- and double their market share ten years ago.
Britain is Toyota's beachhead and largest market in Europe, while Continental Europe remains a tougher conquest. Indeed, Lexus has not yet even made it into the annual J.D. Power rankings in the big German and French markets because its sales volumes there remain too low. But Toyota's cars ranked No. 1 in J.D. Power's German consumer satisfaction survey last year and No. 3 in France. (The 2006 surveys for Germany and France will be released over the next month.)
But that could change soon. Toyota aims to nearly double its Lexus sales in Europe this year to 45,000 -- and so far it's on target. Units were up 109% this year through April, with growth in the hotly competitive German market a sizzling 139%. In the largest five markets of Europe, Lexus sales have grown by 84% this year while in Scandinavia they shot up by 325% -- a wake up call to Germany's premium auto makers. But Lexus' goal for 2006 is still a fraction of the sales of its key premium rivals: BMW sold 632,396 cars in Europe last year while Mercedes sold 689,309.
Analysts say Mercedes Benz, which has been plagued by quality problems since 2003, remains the most vulnerable to losing market share to Lexus. After ranking below the industry average in the British survey for 2005, Mercedes improved its ranking this year by 18 points to 795 out of 900, but remained far below its closest rivals and only slightly above the industry average.
By contrast, BMW ranked No. 5, just behind Toyota with a score of 850, and BMW's popular Mini brand -- built in Oxford -- matched BMW's ranking to tie for fifth. "Consistency is one thing BMW cars have going for them. They live up to their image," says J.D. Power's Sargent. Audi also topped Mercedes this year with 808 points.
Volkswagen's Skoda brand also fared well in the British ranking, coming in at No. 3 overall. As with the Volkswagen group's other other brands -- VW, Audi, and Spain's Seat -- Skoda vehicles share technology with VW, but tend to cost less while offering nice styling and interiors.
J.D. Power's European consumer satisfaction surveys differ from the more focused quality and reliability surveys compiled in the U.S. The factors contributing to the European rankings are a blend of quality and reliability scores (weighted to 30%), overall appeal of the car (28%), service (22%), and cost of ownership (19%). "The main difference is that we look at the overall ownership experience in Europe," says Sargent, "but quality is the most important component."
Data privacy laws make it more cumbersome to conduct consumer research in European markets. J. D. Power's U.S. reliability survey is based on cars that have been on the road for three years, while the European reliability component is based on two-year-old cars.
Among the car brands that didn't fare as well, British customers gave their lowest scores for overall satisfaction to France's Citroën , while Peugeot was fourth from last and Renault was tied with Ford at four positions below the overall average. Sargent said French brands tend to perform better in J.D. Power's annual French rankings. Korean makers Kia and Daewoo also were ranked below average in Britain, but Hyundai came in above average, tucked between Volvo (F) and Audi.
The No. 2-ranked car model was the Honda Jazz, a $15,000 "supermini" that has won raves from British car reviewers. While Suzuki's Liana, which starts at around $19,000, grabbed the No. 3 slot. Fiat's (FIA) overall score was near the bottom of the list, but its new Panda model was the top-ranked "basic" car. In the hotly-contested "executive/luxury" class, the top three models were the Jaguar S-type, the Volvo V70, and the Mercedes E-class.
To be sure, the tastes of British car owners aren't necessarily the same as buyers across the Channel: Most of its domestic auto makers have been bought out or shut down. But where the highly competitive British market goes, the Continent, with its powerful home-market champions, seems to be following at a more gradual pace. Toyota's steady domination of quality and service rankings is a wake up call for European auto makers.
For more on the survey results, see jdpower.com