Toyota luxury boss says sub-$30K car 'wouldn't be a Lexus'

Templin: "You can't build a Lexus with the quality, the durability, the reliability, the craftsmanship, the content that we put in a Lexus and sell it profitably under $30,000."
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TOKYO -- A senior Lexus executive said that a car priced below $30,000 would not be worthy of the brand, in an indirect dig at German rivals who have been moving downmarket.

“We could go down and build a car under $30,000, but it would be decontented, and you’d be cutting corners. It wouldn’t be a Lexus,” Mark Templin, Lexus International’s executive vice president, told Automotive News.

“To be honest with you, you can’t build a Lexus with the quality, the durability, the reliability, the craftsmanship, the content that we put in a Lexus and sell it profitably under $30,000. You just can’t do it,” he said.

Lexus’ $30,000 line in the sand may hint at a new subtle marketing ploy to undermine its rivals’ reputation for quality by questioning how they manage bargain luxury.

Slap at rivals 

Templin’s comments were a not-so-subtle slap at German rivals such as BMW, Mercedes-Benz and Audi, which are leaning on lower-cost entry models to sell to younger buyers.

Mercedes scored a hit when it introduced the CLA in September at a starting price of $29,900, plus $925 shipping to raise the sticker to $30,825. Through June, CLA sales totaled 10,576, despite supply constraints, to comprise 11 percent of the brand’s car sales.

In other overseas markets, Mercedes trolls even lower with its A-class hatchback. BMW counters with its 1 series, while Audi competes in the entry-level fray with its A1 compact.

“Is that luxury?” Templin asked of the rush to move downmarket.

Other Lexus officials have noted previously that Toyota Motor Corp.’s other brands -- Toyota and Scion -- cover the sub-$30,000 segments so that Lexus need not have offerings for customers in that price range. But Templin’s comments were the first to assert that vehicles priced below $30,000 would not truly qualify as luxury products.

Poor reviews, good sales 

Some publications -- including Consumer Reports and USA Today -- have given the new CLA a thumbs down, validating Templin’s point by essentially saying that the sedan is not sufficiently Mercedes-like. But Consumer Reports also was not impressed by the redesigned Lexus IS, which is one of the least expensive models in the Lexus lineup.

The German luxury brands’ smaller, less-expensive cars have helped to boost their sales volumes.

Through June, Mercedes-Benz’s U.S. sales, excluding Sprinter, rose 7 percent to 151,624 vehicles. BMW brand’s U.S. sales rose 12 percent to 157,382, and Audi’s climbed 14 percent to 84,349.

Lexus sales continued their rebound, jumping 17 percent to 138,689.

Lexus lags 

After dominating the U.S. luxury sales title for more than a decade, Lexus fell behind the German brands after being hit with Toyota’s unintended acceleration recall crisis and crimped supply in the wake of Japan’s 2011 earthquake and tsunami.

Lexus sales peaked in the United States in 2007 at 329,177. But the brand, which sells roughly half its total volume in North America, remains well behind its German rivals globally.

In 2013, BMW led the pack with global sales of 1,655,138, up 7 percent. Audi followed at about 1,580,000, up 8 percent, then Mercedes-Benz at 1,565,563, also up 8 percent. Lexus’s global sales were roughly 500,000.

Lexus comes closest to the $30,000 magic number with its CT 200h hybrid hatchback, which starts at $32,975, with shipping. But Templin said that nameplates fetching more than $50,000 generate the majority of Lexus’ global volume.

The RC coupe due later this year may nudge the average higher. While it is expected to deliver niche volume, Templin said the United States will be its biggest market “by far.”

The new NX compact crossover, which went on sale July 29 in Japan, starts at 4.28 million yen. That converts to around $41,970 at current exchange rates. Lexus’ U.S. pricing is generally much lower than a straight conversion of the Japanese sticker.

You can reach Hans Greimel at hgreimel@crain.com. -- Follow Hans on Twitter


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