Lexus testing new hybrid math

February 19, 2018 12:00 AM

Lexus has quietly changed the math for the 2018 model year, significantly lowering the hybrid premium for its two most popular crossovers and rolling out a sporty new hybrid platform for its LC halo coupe and LS flagship sedan.

Lexus has mostly sold the hybrid versions of its mainstream sedans and crossovers at a steep premium to its gasoline-only models, locking in environmentally conscious buyers or the occasional penny pincher during times of high gasoline prices.

But paying several thousand dollars extra for a battery pack and a couple of electric motors has rarely made economic sense in the years since Lexus rolled out the first luxury hybrid vehicle in the U.S. in 2005 with the RX400h.

So Lexus has quietly changed the math for the 2018 model year, significantly lowering the hybrid premium for its two most popular crossovers and rolling out a sporty new hybrid platform for its LC halo coupe and LS flagship sedan.

Bracken: Lexus has plans for electrification

"We have your true environmentalists, and you can certainly appeal to that group of buyer, but to broaden the appeal we felt compelled to bring that premium down," said Jeff Bracken, general manager for Lexus.

The pricing strategy serves two goals: to create an affordable hybrid option and to make it easier to hit federal fuel economy targets, Bracken told Automotive News.

"By pricing our hybrids much, much closer to the gas models so the premium is a thousand dollars or fifteen hundred dollars, that will allow us to increase our hybrid mix and allow us to move closer and comply with CAFE regulations," he said.

What that means on the showroom floor is a Lexus NX hybrid with a sticker price of just $950 over its gasoline-engine counterpart, compared with a $3,035 premium last year, said Michael Moore, senior manager for Lexus product marketing. For the RX crossover, the hybrid premium shrank to $1,025 from $5,820.

"The No. 1 focus was we want to make this powertrain available to more people," Moore said. "And with this new strategy, we think we will be able to accomplish that."

Some of the cost savings comes through standardizing the equipment in the gasoline-engine and hybrid versions.

Electric charge

For the 2018 model year, Lexus is narrowing the premiums it charges for hybrid models to as little as $950.
Gasoline model	MSRP*	Hybrid model	MSRP*	Premium
ES 350	$38,950	ES 350h	$41,820	$2,870
GS 350 rwd	$50,695	GS 450h rwd	$63,635	$12,940
LS 500 rwd	$75,000	LS 500h rwd	$79,510	$4,510
LC 500	$92,000	LC 500h	$96,510	$4,510
NX 300 awd	$37,385	NX 300h awd	$38,335	$950
RX 350 awd	$44,670	RX 450h awd	$45,695	$1,025
RX 350L awd	$49,070	RX 450hL awd	$50,620	$1,550
*excludes shipping

Prior to the current model year, the NX and RX hybrids came with more standard features in addition to all-wheel drive, Moore said. Now, the trim levels for the gasoline models and the hybrids include the same equipment for a better apples-to-apples comparison of value.

"It's much more in line with a powertrain option strategy vs. a unique model," he said. A buyer can upgrade to the hybrid powertrain without loading on more options, for example.

Favorable outlook

While it's too early for a proper evaluation of the pricing, early signs are positive. Moore said the NX hybrid accounted for about 13 percent of all NX sales in January compared with 7 percent in January of 2017.

The pricing strategy applies to the NX, RX, new LC coupe and redesigned 2018 LS sedan for now.

Lexus took advantage of updates to the NX, the launch of a three-row RX L and the new LC/LS platform to roll out the pricing. It does not apply to the ES sedan, Lexus' No. 3-selling model, but "we'll see how that unfolds," Moore said.

The ES is up for a major redesign this year following the January unveiling of the re-engineered Toyota Avalon, with which it shares a platform.

The $4,510 premium for the LC and LS hybrids compares with the more than $45,000 premium for the 2017 LS hybrid, which was special order only. LC prices carry over from last year.

The logic of creating hybrid versions of a performance-oriented coupe and sporty sedan is to offer a compelling experience without making too many sacrifices.

The LC500h with a V-6 engine and electric motors is a step slower than the LC500 with a gasoline V-8, but "it really is shocking how fast that car is and how well it drives," Moore said.

Indeed, some of the hybrids outperform their gasoline-engine counterparts, such as the RX450h, which has 308 hp compared with the gasoline-only RX350 with 295 horses.

The more powerful hybrid motor could be popular in the longer, three-row RX L. The price premium for the RX450hL over its awd gasoline counterpart is $1,550.

The RX L hybrid is expected to be rated by the EPA at about 30 mpg combined, compared with the gasoline engine's 21 mpg.

New buyers

With those kind of numbers, Moore thinks the new hybrid pricing strategy could bring in new buyers to Lexus.

"I think it will also get the attention of people who weren't previously looking at Lexus, or weren't looking at NX or RX, because it's a very compelling case now," he said.

The pricing strategy, however, is not a response to the electrification going on at Lexus' competitors in the luxury industry, Moore added. Lexus has electrification plans of its own.

Bracken said at the Detroit auto show in January that by around 2025, every Lexus model will be available either as a dedicated electrified model or have an electrified option.