John Iacono is no stranger to the job of chairman of the Lexus National Dealer Advisory Council — in fact, he's become somewhat of a regular in the role.
Iacono, 61, a partner in the 17-store BRAM Auto Group in the New York City area, is starting his third spin as chairman of the Lexus dealer council. His part of the Bram partnership is to manage the group's three Lexus stores in Brooklyn, Queens and Manhattan.
Iacono says Lexus is transforming its product lineup and is focused on improving its customer experience even further. He says Lexus is doing so while treating its dealers as true partners. He spoke with Staff Reporter Larry P. Vellequette. Here are edited excerpts.
Q: Last year was unprecedented in this industry, from the lowest of lows to record profitability. Walk me through what that roller coaster was like for you and your stores.
A: We were basically confronted, on March 18, with a decision to shut down all of our stores. Essential or not, we just had a complete defection of consumers out in the marketplace. The shelter-in-place that was mandated on us just kept everybody at home, so whether it was a service that was essential or not, we just felt that we needed to be mindful to the folks in our work force. Until we really understood what the hell was going on, we decided to just have everyone stay home, and we actually shut our doors for six weeks — both service and sales.
In the six weeks that we were home, myself and my partners, we kind of looked at what does tomorrow look like? We looked at our cost to do business. We looked at how many people worked for us. We took a look at the sales side of it, and the new-vehicle department — where we make x gross, but it's this big of an expense to make that much gross — and we said, "You know, this might be a moment in time where we really redesign what it is that we know is the broken piece of our business."
When we reopened the door six weeks later, business on the service side came back quickly. Within 10 days, our service business was almost to where we knew it should be.
Did your sales process change?
On the sales side, because that wasn't essential, you did it on a digital platform, and you did it by appointment or with curbside delivery at someone's home, or you didn't do it at all. Dealers, and the industry, as resilient as we are, we figured it out quickly. We didn't do anything that the customer wasn't asking for, for many years. We finally did what it is that we needed to do in order to accommodate ourselves, but at the end of the day, we did something that customers have been asking us that we've resisted and said, "No, you're either going to come into the dealership and you're going to do it our way, or you're not going to do it at all." And because there were so many dealers that had all agreed that this was the only way to do it, that was the way it was done.
What do Lexus dealers need in the brand's product lineup right now?
During the last two years, what we needed was product; it was as simple as that. The cadence wasn't as good as we really would have wanted it to be. Lexus, despite not having the latest and the greatest, was able to compete with the other luxury brands in a way that, probably if our vehicles and our relationships with our customers weren't as good as what they are, we couldn't have sold as many cars as we did.
It's a product driven industry, and when you don't have the right product, people defect and go elsewhere. It's especially tough for Lexus dealers when our customers go elsewhere, because our vehicles are bulletproof — they are so good that customers don't need as many visits to the dealership to keep them on the road. But I think the worst is behind us now in terms of the product cadence.
Starting with the new IS, we've had SUVs that we've been asking for that we have gotten the thumbs up on, and they recently showed us some coming products that I really can't expand on, but that we are very, very enthusiastic about. We've been asking for larger SUVs, we've been asking for a true three-row people mover, which we're getting relatively soon. I believe that in the next two to three years, our lineup will be totally refreshed, and the conquest ability for folks that are not in the Lexus family is going to be much greater than what it is right now.
Lexus executives tell us that there are new infotainment systems coming as well, which I understand has been a sore point with customers.
That has been a very pointed conversation that we've had with the executives, whether it be the executives in Plano, or even the Japanese staff, where we've made them understand that there's no other company that should have the ability to give us what it is that other companies are giving their dealers. Thank God, because the telematics that are coming our way are going to be industry leading and they're going to be what we currently do not have. That should help us continue to attract younger buyers, because the future of our brand depends on the folks coming in at the early stage of their ownership cycle, and then having them move toward product that keeps them loyal to the brand. We had lost that a bit. This will help.
How is Lexus working to attract younger buyers?
UX is the newest way of bringing younger buyers in, but IS has done a great job for us as well. IS has been a great vehicle; the NX has also brought new buyers to the brand, because when you look at the NX aesthetically, it's a vehicle that is more appealing to buyers. RX is our bread and butter vehicle — you always want that RX to be what it is, because it pays the bills. And then everything else that we have that is getting upgraded, starting from the GX, to the LX, to the LS. Not too many people really understand where we're going with the LS, which will be a true benchmark for the brand.
Is it really a sedan that tomorrow might be the flagship of our brand? Or will it be an ultimate SUV? I really think it's going to be the latter of the two. Not as many people look at a sedan as being the ultimate vehicle that they look to aspire to drive.
I understand that we may soon see Lexus climb into the off-roading craze, perhaps even with a successor to the Toyota Land Cruiser.
From what I know of what that vehicle is, it's going to be pretty cool. It's one of those niche vehicles where I don't think they'll be looking so much at volume, but more of as a halo in that space. I think there's a cool factor in having Lexus give us a vehicle, at low volume, but something that brand is not really known for.
As a Lexus dealer, it makes me believe that they really get it, because they're giving us a vehicle that may not sell at a high volume, but that will wow customers when they come in and say, "I have to have one of those!" The customer that looks at that vehicle is going to be lifestyle driven, and we really don't have that right now. What we have are safe, great vehicles that will get you from Point A to Point B, that are built well and behaves correctly and with great reliability.
What has it meant for your dealerships and other Lexus dealers as the brand continues to expand the number of hybrids in its lineup?
I think we've always had a hybrid strategy. It was just too expensive for us to have had the success that we're having right now. Over time, the pricing became one that was more proper with the willingness of consumers to make the move to hybrid. When gas prices aren't that big of an issue, you don't have that payment pitch to give a customer that the hybrid is the reason they need to pay for a vehicle.
When you get a gas-powered vehicle and the same vehicle introduced in a hybrid version, the step up is not as great as it used to be. I remember the first time we had gotten a hybrid, when we had the LS, and then we got the LS 600 H.
The step up on that vehicle was about $50,000. We used to have these things sold, in quantity, as they did out in San Francisco. We had both sides of the U.S. selling high volume, but it was selling to people who wanted to spend $130,000 for a vehicle. In my Brooklyn store and my Queens store, I couldn't sell it, but in Manhattan, we did because it was chauffeur-driven, it was that kind of a vehicle.
Now, from the UX hybrid, to the NX hybrid, to the RX hybrid, to the LS hybrid, the spread is not much, there is a value that is a story to be told, especially if someone wants to enter that space, that we have the vehicle and the price is correct. They finally got the pricing right, and I think that comes from also the engineering piece, having the cost be something that they have under control.
Your group has a number of brands and captives that it works with. What's the advantage that Lexus Financial Services gives you and other Lexus dealers?
I think what makes LFS unique is that they stand where the market is; they know what they need to do. There was no better example of that than last spring, when we were shut down and other dealers were shut down because of COVID-19. When dealers were in need, both Lexus dealers and Toyota dealers, Toyota Financial Services and Lexus Financial Services came through with a lifesaver that was thrown out to an industry that was knee-deep in problems and not knowing what tomorrow might bring for three months.
They came in, right out of the box, and gave us the tools that we needed to survive in a place where we were trying to see if we were going to be like all of those other businesses that didn't end up making it and closed their doors. All the things they did for dealers, they treated us as real financial partners. You have the ability to feel that you have them there for you, in good and bad times, and it makes a hell of a difference, it really does.
I want to ask about EVs because executives at Toyota Motor North America have finally decided to jump back into the EV market, probably at Lexus. What will that mean for the brand and its dealers?
With the EV market as it is right now, there's really one player out there that is absorbing all of the opportunities. I believe that market is growing and will continue to grow, and that EVs are the wave of the future. How fast do we get to volumes that are going to get the attention of the industry holistically I don't know. I do know that we have one coming in.
I personally with other Lexus dealers have gotten a glimpse of what that might look like when — not if, when — it comes to Lexus, and I believe that it has put a smile on our face, that we're going to have a player in a market. That's very important to me, personally, in New York City. I can't tell you how happy I am that we have something coming.
Do most Lexus dealers want or need an EV in the lineup?
Toyota and Lexus will always give us the opportunity to compete. I've talked to our chief engineers and chief designers, and they understand pretty well; they know what we're asking for. And I believe that they also know that, as dealers, at every council meeting that we have, EVs are always one of the topics that we speak about, so they know that we want it. And we're getting it.
But right now, we're really not missing out as much as maybe some of the dealers make it seem that we are, because the hybrid is really doing a good job for us to be in that space but not actually all the way in.