TOKYO - A prosperous U.S. Lexus dealer who walks into one of Toyota's new Lexus stores in Japan might be a little surprised by the scene.
Oh, the store will look as elegant as any Lexus dealership in the United States. But the operations, though spiffy, will have a distinctly different flavor. For one thing, only sedans and sport coupes are in the showroom - no SUVs or crossovers. And the sales volumes are a great deal lower.
Indeed, the high level of investment Toyota insisted that Lexus dealers pour into their two-story Taj Mahal stores won't be paid off soon.
Toyota officials insist Lexus' upcoming Japan launch is a good long-term investment for both dealers and Toyota.
"It may take a year, but they'll be profitable," says Kyoji Sasazu, Toyota's executive vice president for domestic sales operations.
Perhaps. But it is hard to see how Japanese dealerships will turn a profit in a year.
When Lexus cars go on sale in Japan on Aug. 30, the lineup will be limited to the GS sedan and SC coupe. The IS sedan joins the lineup a month later. Lexus adds the hybrid-powered GS 450h sedan in the spring and the flagship LS sedan later in 2006.
Lexus will leave the luxury SUV segment to Range Rover and other imports for now. It has not given a date to add an SUV to its Japan lineup. In the United States, the RX 330 SUV is the best-selling Lexus model. SUVs made up 53 percent of Lexus sales in the United States last year.
After adding the IS, Toyota expects to sell 3,000 Lexus cars a month, spread over 151 dealerships by year end. That works out to about 20 sales a month per store, or 240 a year.
By comparison, U.S. Lexus stores averaged 1,384 sales a year, or 115 a month, in 2004. Lexus ranked second among brands in the United States in per-store sales. It was right behind industry leader Toyota Division's 1,464. Toyota's sales include Scion vehicles.
Lexus sales in Japan will increase quickly. In 2006, Lexus aims to sell between 50,000 and 60,000 in Japan, or as many as 400 cars per store. Eventually it aims for sales of about 100,000 a year in Japan through 180 stores, or about 556 cars per store.
Not bad for Japan
Lexus' per-store sales figures are not out of line for Japan. Toyota's Netz channel, which was reorganized to focus on sales to younger buyers, aims to sell an average 38 vehicles a year at its 1,600 outlets. Netz sells vehicles offered in the United States such as the Toyota Echo small car and Highlander SUV and the Scion xB SUV and xA subcompact, as well as several Japan-only minivans.
Sasazu insists the burden on Lexus dealers in Japan isn't onerous.
He says some Lexus dealers avoided spending on expensive real estate by converting existing Toyota-brand stores into Lexus outlets. Toyota also was flexible in its requirements for dealers' investments in stores, particularly those in small markets.
But Sasazu admits Lexus dealers won't have service or used-car revenue at first and will depend on new-car sales. And there won't be many of those at the start.