House of the Rising Sun: Lexus

Houston, Texas, April 2007

Launched by Toyota in the fall of 1989, Lexus automobiles represent the company's effort to create a separate world-class luxury-car brand.

Lexus took the automobile industry by storm, building an exceptionally smooth, quiet car, and a dealer network to match.

A well-crafted cabin and cushy ride mask surprisingly quick performance.

By 1991, in the space of only two years, Lexus had become the top-selling brand of luxury cars in the United States.

In 2006, Lexus sold 322,434 vehicles in the U.S.

The company bested every other luxury car competitor, for the seventh straight year.

Lexus Division (of Toyota) reported March 2007 sales of 28,855 units, a record.

The downsides are the lack of distinctive styling and softer handling than rival sport sedan builder BMW.

In the years since 1989, the Lexus brand has established itself as a leader in quality and reliability surveys.

In the J.D. Power and Associates 2006 Customer Retention Study, Lexuses ranked 2nd out of 37 makes. An incredible 63.2% of discerning luxury buyers surveyed returned to purchase another vehicle.

The automotive industry's average retention rate is about 50%.

The brand does not offer quite the handling of its German rival, but for quality, comfort, and dependability, Lexus is unsurpassed.

Lexus was designed for the US market, and has made little headway in a European luxo segment long dominated by German makes.

If You Build It, They Will Come

The "secret" of Lexus success is unmatched quality in every aspect of the ownership experience, for a majority of buyers.

J.D. Power and Associates 2006 Vehicle Dependability Survey named Lexus the most reliable brand in the US.

The survey queried over 47,000 vehicle owners about problems they experienced in the first three years of ownership.

For the twelfth consecutive year, Lexus achieved top ratings.

New York's Luxury Institute survey also ranked Lexus highest for the customer experience.

Quality and customer service bring repeat buyers, fueling the fast growth.

The list of awards and accolades goes on.

Many Lexus vehicles are manufactured in Toyota's quality award-winning Tahara, Japan plant.

The North American-market RX 350 is produced in the city of Cambridge, in Ontario, Canada, at the first non-Japanese Lexus plant. Lexus manufacturing processes and quality standards exceed those used for Toyotas.

Welding processes, body panel gaps, and paint quality are carefully monitored on Lexus models

Being the quality leader is one thing, but the expectation of "Relentless Pursuit of Perfection" quite another.

Nobody's perfect, especially in the automobile business.

But it takes real research to find flaws in the Lexus business model.

There are a few.

Toyota/Lexus engines had oil sludging issues in some 1997-2002 models. These were handled in the stonewalling/denial pattern expected of lesser makes. A recent class-action lawsuit settlement reveals that there were 3.5 million potential claimants. The majority of plaintiffs were Toyota owners, but some 1998-2001 Lexus ES300 and RX300 models were affected.

Social Darwinism: Lexus Customer Service

Lexus has established a reputation for service after the sale. The waiting areas in dealership service departments may feature a refreshment bar, business center with computers and fax, and even an accessories/gift shop. Dealership amenities might include a children's play area, indoor putting green, even a coffee shop.

Dealership services may include free loaner cars, car washes, and shuttle service. Lexus owners will usually receive a follow up survey to rate their service experience.

Does this mean 100% of customers are happy? No way!

Dealerships, including premium brands like Lexus, exist in a dog-eat-dog environment and are independently owned. Many customers are surprised at the very high service charges premium car dealers impose for mundane repairs, trivial parts, and routine servicing.

$200 oil changes are common.

There is still a strong incentive for dealer service departments to stonewall, especially with mechanically naive customers. Just remember this is the car business.

That plastic cover that hides the motor is there for a cosmetically pleasing appearance, but also to discourage owners from thinking about technical issues.

Lexus-only parking at private sports and entertainment venues takes valet parking one step further. This snob appeal tactic is actually a clever marketing ploy aimed at the thousands of fans who must march past the reserved area to the game or show.

Lexus is Japanese for Loaded

These cars come with an incredible array of high-tech gizmos. To me many of these are unnecessary. The parking assist feature is amazing, but many say it is for "old ladies." I say if you need this maybe a driving school would be a better investment.

Of course, true safety features, which abound on Lexuses, get rave reviews here. The jury is still out on lane control, but backup cameras and sonars are worth it, especially if it is your grandchild who is saved.

Most "luxury" features don't move me but here is what does; technological innovation that leaves American carmakers in the dust, and is making BMW sweat.

Did they just say eight speed automatic?

Back in the 1960's, when the old slushbox Powerglide two speed was their best automatic, I always said that General Motors's downfall would center around their failure to keep up in the automatic transmission area. That day of reckoning has finally come.

I respect engineering, especially materials science and aerodynamics. For instance, an incredibly low .26 cd (coefficient of drag) allows the company's flagship LS450 sedan to offer both fuel efficiency and performance.

If you had told me just a few years ago that a 4300 pound mass-market sedan would do 0-60 in 5.4 seconds, while achieving 27 mpg highway, "scorn" would have been the polite response.

In the vehicle cabin, Lexus has used touchscreen navigation system interfaces while competitors struggle with dials and buttons.

The product is known for unmatched integration, the whole being greater than the sum of the components.

Lexus is now completely separate from the Toyota mother ship, with its own design and development facilities and manufacturing process.

Lexus’ product lineup includes the IS, ES, GS, and LS sedans, the SC convertible coupe, and the RX, GX, and LX luxury sport utility vehicles.

In January 2007, taking aim at the aforementioned Teutonic competitor, Lexus introduced a new performance division called F-Series.

Best of All Possible Worlds: Dealerships

Lexus' 200 dealers have spent about $500M on showroom and service upgrades, and it shows.

Dealerships have a hotel-lobby atmosphere that says: "If you have to ask, you can't afford it."

Twelve Lexus dealerships are located in the state of Texas, located around the largest cities. This low density is perhaps the Achilles heel of the premium marketing model.

News-Blog Updates for Lexus

11/21/07 Lexus Leads 2007 JD Power Sales Satisfaction, Adds IS-F Sport Sedan