Lexus: No interest in $30,000 models

Bracken: Kudos for rival's CLA
Price of entry
Luxury brands' lowest-cost models, including shipping
  
Mercedes-Benz CLA$30,825
BMW 1 series$32,425
Lexus CT 200h$32,960
Related Topics

DETROIT -- Lexus boss Jeff Bracken concedes that Mercedes-Benz's low-priced CLA sedan is off to a flying start, but he vows not to follow Mercedes down the price ladder.

"We will not head down below $30,000," said Bracken in an interview here. "We have Toyota and Scion to handle that price level for us."

Mercedes introduced the CLA in September at a starting price of $29,900, before a $925 delivery charge that brings the total to $30,825. Through November it has sold 10,828 units of the front-wheel-drive compact.

"They are off to a great start," said Bracken. "They are really doing well, and it has probably not only impacted their overall volume with CLA, but also brought in some traffic for some of the other series that they represent, and clearly helping drive the luxury segment in total."

Lexus' lowest-priced vehicle is the CT 200h hybrid at $32,960 and the redesigned IS sedan, which starts at $36,860. Both prices include shipping. BMW's lowest-priced vehicle, the 1 series, starts at $32,425, including shipping. BMW sold 6,181 1-series units through November.

The CLA is a major reason Mercedes is likely to dethrone BMW as U.S. luxury brand sales champ this year. Lexus held that sales crown for 11 straight years until 2011. Bracken said he would love to get the title back, but conceded "that will be difficult" as long as his German rivals offer low-priced small models.

Bracken expects Lexus full-year sales to increase 12 percent to more than 270,000 units. Mercedes and BMW are both likely to top 300,000.

Bob Carter, senior vice president of Toyota Motor Sales U.S.A., said Mercedes and BMW need small, high-mileage vehicles to meet stricter 2016 U.S. Corporate Average Fuel Economy standards. But Lexus has sister brands Toyota and Scion to carry that torch, he said.

Both German automakers have small-vehicle brands to help on CAFE, but their U.S. volume is much smaller than that of their luxury counterparts. Through 11 months, Mercedes' Smart sales totaled 8,409, and Mini was at 59,910, a fifth of BMW's volume. By contrast, Toyota's Scion has 63,998 sales and Toyota brand has 1.7 million.

That's a competitive advantage that lets Lexus concentrate on more premium and higher-margin vehicles, Carter said.

"By not diluting its brand image, Lexus will stay focused," he said. "It lets Lexus hit on higher levels, in segments more traditionally associated with luxury."

Bracken acknowledges the CLA and 1 series are attracting younger, first-time buyers, but said it's too early to say that will help Mercedes and BMW long-term.

He said: "We don't know how loyal those new customers will be."

Lexus expects another sales increase next year but has not yet set an internal target.

"We'll be bumping up against 300,000," Bracken said.

That would be a level Lexus has not achieved since its sales peaked at 329,177 in 2007.

You can reach Jesse Snyder at jsnyder@crain.com.


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