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Toyota to bring Lexus to Japan

Toyota aims to oust its German rivals as the top sellers of luxury cars in Japan with plans to bring its Lexus brand, already the top U.S. luxury car, to Japanese drivers next year.
/ Source: Reuters

Toyota Motor Corp aims to oust its German rivals as the top sellers of luxury cars in Japan with plans to bring its Lexus brand, already the top U.S. luxury car, to Japanese drivers next year.

With a 43 percent share of Japan's car market, the world's second largest, Toyota is by far the dominant force on its home turf, but it has lagged in the luxury sector.

The world's number-two auto maker said on Wednesday it initially aimed to sell 50,000 to 60,000 Lexus cars a year in Japan and would eventually raise that to 100,000 — or one-third of Japan's luxury car market.

"Lexus has been very well-received in the United States, but when we look at Toyota's place in the domestic luxury car market, it's unsatisfactory," Toyota Executive Vice President Kazushi Iwatsuki told a news conference.

"In order to become a global brand, we need it to succeed in Japan."

Toyota will launch the Lexus in Japan in August 2005 and roll out four new models in the first year, each bearing a design concept distinct from existing Lexus cars, which are currently sold in Japan under the Toyota brand.

The new models will eventually replace the Lexus LS, GS and IS sedans and the SC coupe already sold in most markets outside Japan.

"We intend to build the Lexus into the new global premium brand for the 21st century," Iwatsuki said.

But foreign marques, led by Mercedes-Benz and BMW, account for one-third of Japan's full-sized car market, selling 244,000 units last year.

Toyota's sales of high-end large sedans, meanwhile, fell below 8,000 units a month in 2003, from about 12,000 in 2000.

High hurdles
Analysts say convincing many of Japan's Western-car lovers to switch to a homegrown Lexus could be tough.

"For a lot of people in Japan, a Mercedes is a Mercedes and a BMW is a BMW — they're irreplaceable," said Tatsuo Yoshida, auto analyst at Deutsche Securities in Tokyo. "The sales target seems a bit high, even at the initial 50,000 units a year."

While company officials said the Lexus cars would be priced at a premium to their Toyota-badge equivalents — likely between four million and eight million yen ($35,500-$71,500) — promotional and running costs would also rise as Lexus aims to offer its trademark luxury feel at its showrooms.

"There's not going to be much of a positive impact on profits for the time being," Deutsche's Yoshida said.

Nor is adding the Lexus line going to translate into a pure rise in sales for Toyota.

Tony Fujita, project general manager for Lexus in Japan, said that once the Lexus line is launched, the flagship Crown sedan will be the Toyota brand's only remaining luxury model in its domestic market.

Toyota will also have to come up with a fresh approach to marketing for Lexus to succeed.

While the brand's strategy of offering attentive service at its showrooms was a novel enough concept in the United States, Japanese customers are already accustomed to one of the world's highest levels of service from automobile dealers.

Toyota officials, however, said they were confident that a new product identity for the Lexus line, hints of which appeared in a design philosophy unveiled at last year's Tokyo auto show, would offer an attractive alternative.

Although Toyota may face a more finicky customer base in Japan, analysts said Lexus's success in the United States, the world's biggest luxury car market, boded well.

When the brand was first launched there in 1989, many mocked the idea of a Japanese car maker entering the luxury market and transcending the image of small, inexpensive cars.

But success came quickly as customers took to its quality, reliability and competitive prices, and Lexus was the best-selling U.S. luxury car for a fourth straight year in 2003.