Home-field advantage? Toyota readies Lexus for its debut in Japan

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[Tokyo] Lexus might be a hot seller in the U.S., but it isn't even sold in its home market.

That is, until this month when Toyota Motor Corp., in relentless pursuit of becoming a global brand, brings the brand to the world's second largest car market. Though it is the largest automaker in Japan, it has not had a luxury nameplate in the country.

"Lexus will be positioned in Japan as more luxurious than elsewhere in the world," said Tokyo-based Chris Beaumont, president-CEO, Japan of Grey Global Group. "It will be a completely different brand experience compared to Mercedes-Benz and BMW, its main competition, and it's timely, because Japan's post-World War II baby boomers have enormous disposable income and they like luxury brands."

Four Lexus models, the LS, GS, IS and SC cars, will be introduced in the next year at 180 opulent dealerships nationwide outfitted with leather couches and marble floors. Sticker prices, slightly higher than comparable Lexus sedans in the U.S., will range from $35,000 to $61,000.

SIGNS OF RECOVERY

The launch will be supported by advertising created by a Toyota-owned agency called Delphys, the Japanese advertising giant Dentsu and Dof, a design agency jointly owned by Dentsu, a Japanese branding agency called Frontage (itself a joint venture between Dentsu and Sony Corp.) and Dof's president, Yukio Ohshima, a former executive at Dentsu and Frontage.

"As signs of recovery began to appear in Japan's economy in 2004, consumers took renewed interest in superior luxury goods," said Masahiro Yotsumoto, planning director for Dentu's Center for Consumer Studies in Tokyo. "Sales of the new luxury sedan models unveiled in 2004 have been brisk, with some registering sales of over 6,000 cars in their first month on the market."

Deborah Meyer, VP-marketing of Lexus in the U.S., said there was collaboration between the U.S. and Japan on the launch and in developing the global positioning of "the passionate pursuit of perfection."

The company expects to sell just 50,000 to 60,000 Lexus vehicles per year, a fraction of Japan's highly competitive luxury-car market. Even so, Toyota's president, Katsuaki Watanabe, described the launch of Lexus in Japan at a Tokyo press conference last month as "the realization of our dream to create a global luxury brand."

The U.S. will remain the largest market for Lexus, but Toyota believes worldwide sales of the brand will climb to 500,000 in 2006, up from nearly 400,000 in 2004, with the increase largely coming from sales at home.

But many are skeptical about the prospects in Japan for Lexus, which has only been truly successful in the U.S. market. European luxury car buyers prefer German cars, from BMW, Mercedes Benz and Volkswagen Group's Audi.

An ad agency exec in Tokyo said, "Why would Japanese consumers pay $20,000 extra to buy a Toyota that's had a Lexus logo slapped on the front, when it's essentially the same car as the cheaper, trusted Toyota models that have been on sale here for years?"

NICHE

Other observers believe the car neatly fills a gap.

"There is a niche market for overseas models or versions of Japanese stuff and you can put a premium on it. Japanese people like the idea of it," said Dave McCaughan, senior VP-director of strategic planning at McCann Erickson, Tokyo. And in Japan's nationalistic society, Lexus may appeal to some wealthy young professionals who prefer domestic brands over European models.

Grey's Mr. Beaumont speculated that Toyota's ultimate reason for launching Lexus in Japan lies elsewhere. "I think Toyota wants to beef up its portfolio in the luxury category here because they want to own a global luxury brand-and you can't be global in the auto industry unless you're in Japan-so it will do better in China."

Toyota opened Lexus dealerships last year in China, which international automakers believe has the potential to become the top luxury car market in the world.

contributing: jean halliday

Not so fast

Asks one ad exec in Tokyo: "Why would consumers pay $20,000 extra to buy a Toyota that’s had a Lexus logo slapped on the front?"

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