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Sunday, May 22, 2005

Lexus and Japan in Europe

Autonews (reg. required) has an article about Lexus's travails in Europe. It's interesting. Lexus is seen by many if not all reliability surveys as the most reliable brand in existence. Lexus offers adequate handling and power compared with rivals BMW and Mercedes, adequate accessories, and superior reliability. Sales are increasing, but in general the whole enterprise to me seems unprofitable. Aesthetically, Lexus is inoffensive.

Looking at how Lexus took the American luxury market by storm, Lexus entered an arena where the homegrown luxury makers, Cadillac and Lincoln, had largely maintained marketshare by selling unexciting larger engine versions of Chevrolets and Buicks and Fords, and calling them luxury cars. Basically, the domestic car makers put little effort towards maintaining market share, and Lexus was able to get a permanent foothold. Cadillac and to some extent Lincoln as well have changed their tune and are not making decent cars, but it was that act of letting the guard down for years that allowed Lexus to become popular in America.

With Europe, Germany, the largest car market, already has a very developed luxury market which is dominated by homegrown companies. Italy too with Maserati and Alfa Romeo has luxury brands comparable at least in price and sophistication with Lexus. Britain has Jaguar, France has nothing but high end Peugeots. The future of the Japanese in Europe are markets where the homegrown companies have taken their eyes off the ball. I think a close watch on Lexus in the future is very important. The general trend in America, and more slowly, Europe, is a gradual realization by markets that the Japanese build the most reliable vehicles, but not necessarily the most exciting vehicles. The question next becomes whether customers are looking more for reliability, or for driving excitement. In the US the answer is increasingly the former, and in Europe it is the latter. But Lexus' and Japanese companies' continued positive sales means that might change, at least in the distant future.

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