Will Lexus ever catch the German Big Three brands in worldwide sales? Toyota’s luxury brand won’t be doing that in the next few years. Instead, it needs to expand into many new segments.
The US being the only major market where Lexus is a force in premium priced segments naturally affects its product development priorities. Yet that keeps it in the catch 22 situation where failing to create or even tailor models for Europe and China means its sales in those markets rise only slowly.
Incredibly, Lexus offers not one diesel engine nor a plug-in hybrid powertrain for any of its vehicles. There is no four-door car to catch the rising wave of interest from buyers who purchase a Mercedes CLA, Audi A3 Sedan or soon, BMW 1 Series sedan. Other gaps in the line-up are glaring but Toyota’s approach has always been to put North America first and try to make that region’s vehicles work worldwide.
One of the things which might soon change TMC’s approach to how it plans future models for its luxury brand is what has been going on with Infiniti. In August, Nissan’s premium division delivered a record number of cars, giving Infiniti worldwide year to date sales of 145,000 vehicles. That’s still some way below what Lexus has done: numbers are only reported by half-year, and in H1, the total was 319,275 vehicles, a five percent increase from the first half of calendar 2015. The success of the UK-built Q30 and QX30 should make Toyota sit up and take notice, though – both cars are selling very well and with exports to the US and Canada now underway, Infiniti seems finally to be headed towards a truly global-facing future.
To quote from TMC’s own press statement, in the 1 January-30 June 2016 period, [there was] “…continuing growth in China (including Hong Kong) of 26 percent to 46,759 vehicles; and 16 percent across Europe and Russia to 36,405 vehicles, 26 percent in Japan to 28,420 vehicles; and 19 percent in East Asia and 37 percent in the Latin America markets”. The Middle East, however, was one of two regions where sales fell, though only by one percent – to 22,484 units.
Reinforcing the observation that Toyota would be well advised to follow Infiniti and its German rivals’ strategy of supplying customers with localised and locally manufactured models (Lexus does not build any vehicles in China or Europe), its US sales have been in decline this year. There was a four percent drop across North America to 162,493 in H1. When the US goes into its next cyclical downturn, Lexus could be badly exposed with no real other main markets to offset that potentially steep decline.
Examining the total for the year to the end of August in Lexus’ number one market, the news was especially grim for cars: every one of its models had a double-digit sales percentage decline. The total was 90,504, a drop of 19.8%. Offsetting this was a 19.6% gain for the combined number of light trucks, these reaching 119,888 for the 1 January to 31 August period. To view the numbers by model, see this press release and then click on August 2016 Sales Chart immediately below 1 September.
Lexus is still on course for a strong 2016, its US management insists, and while it cannot seem to catch Mercedes-Benz, second place was at least secured in August, ahead of BMW. What Lexus needs in North America is what the brand also needs in other markets, as a starting point for its next phase of growth: more compact models, especially crossovers and SUVs.
Audi is now exploring a segment where Renault, Groupe PSA & GM have been the dominant OEMs with their Captur, Peugeot 2008 and Opel/Vauxhall Mokka models respectively. The new Q2 is looking as though it could be a real threat to these high margin small crossovers so why isn’t Lexus ready with its own mini-NX? This could be built at Valenciennes in Northern France, on the same line as the next Yaris. That’s hardly lightly to happen any time soon, given the years of examination and re-examination which TMC gives to any plans to build Lexus models anywhere other than at existing plants.
Ironically, a rival for the Audi Q2 has been thought about, and potentially previewed by the LF-SA, a concept at the 2015 Geneva motor show. The car would logically be manufactured in France alongside the Yaris, with which it could share an architecture, this being TNGA-B.
In the next class up, the CT 200h is reaching the end of what should be a seven-year life cycle, the successor being expected to appear in Japan during the final quarter of 2017. It should again be manufactured by Toyota Motor Kyushu with the platform to be the TGNA-C.
The new CT is likely to be offered as both a five-door hatchback and four-door sedan. The latter is considered to be needed in the US, and should also be useful for the Chinese market. A non-hybrid powertrain will surely be available – something, like the sedan bodystyle, that is not offered with the current model.
Above the follow up to the CT in size terms is the NX compact SUV. Now in its third year of production, a facelift will be the next news for this model. The replacement is due in 2021 and this should be on TGNA-C, the same architecture as the Auris which is set to appear in 2019. Toyota Motor Kyushu should be the main plant but it would make sense to build it in China too, and possibly at Burnaston in England.
ES, HS & IS
Leaving SUVs for the moment, there are now three sedans sized above the NX but below the E segment GS. The first one, the HS, did not work in North America and was withdrawn four years ago. Yet it continues in Japan, where its hybrid powertrain is the main attraction. Volume is, however, low, and it seems unlikely that the HS would be replaced. The same applies to the closely related Toyota Sai, which is more or less the HS’ twin. Production should wind down during 2017.
Another front-wheel drive mid-sized sedan is the ES, and this one is due a successor in 2018. To again be based on the Camry, the new generation car will be manufactured at Kyushu and TMMK’s Georgetown 2 plant in Kentucky. Like the next Camry, RAV4 and multiple other Toyota models, its basis will be TNGA-K.
The Tahara, Japan built IS is meant to be a car to tempt those who might otherwise buy a BMW 3 Series sedan. That hasn’t happened and this model really needs the mid-life update which premiered at April’s Beijing motor show. The 2017 model year IS is especially urgent in the US, where sales fell by 22% in August. It’s not just that people are holding off for the updated car: YtD numbers are down by a quarter, to only 24,085 units (US market). The replacement is due in 2020 but it should be brought forward. Generation four will have the same RWD platform as the future GS sedan.
Before we look at what’s ahead for the GS, it’s the RX, a model which though sized between the traditional SUV categories, has created its own segment. Released in 2015, the current generation RX 200t, RX 350 and RX 450h are set to be joined in some markets by the long-wheelbase RX 350L and RX 450hL from late 2017. A styling refresh should then come in the final quarter of 2018, ahead of the fifth generation model in late 2021, which will be based on TNGA-K. The existing hybrid RX 450h might be replaced or supplemented by a PHEV derivative during the second half of that car’s production lifeycle.
Aside from the underperforming IS sedan, the GS is Lexus’ real problem child. There are no serious faults with this big sedan but buyers keep showing it the cold shoulder, especially in the US, where only 9,898 have been sold so far in 2016, a year-on-year plunge of a worrying 32%. The V8-engined F derivative, launched first in Japan last November, should in theory be driving traffic into Lexus showrooms in the US but so far, its halo effect doesn’t seem to be happening.
It isn’t just that the Mercedes E-Class is way ahead of the GS, or even that SUVs are stealing the car’s traditional buyers in the E-premium sedan segment. The same thing happened with the last generation GS – the replacement, new in 2012, had 47,787 worldwide sales in 2013, almost six times the total its predecessor model achieved in 2011. So TMC needs to think up new ways of how it can compete. It might even consider withdrawing from this vehicle class, though that decision if it is taken, will have to happen soon, as a new GS should be due in 2018/2019. Should that vehicle programme go ahead, Gen 6 will be built in Japan at Motomachi on the same platform as the LC and next LS.
The RC is a curious model. In theory, it should compete with the Audi A5 and S5 but there isn’t much of an engine range. While the Audis are big sellers in Europe, Lexus’ strikingly styled but rarely seen two-door lacks a diesel engine and a convertible bodystyle option. The first of these won’t happen any time soon, if ever, but the open-topped derivative is said to be in the pipeline.
A strong hint that an RC C is planned was the debut of the LF-C2 concept at the LA auto show in October 2014. This gold-painted roadster was the same width as the RC Coupe but 20mm longer, according to Toyota.
With GS volumes so low, Motomachi, where the RC is also made, could well do with some extra potential production from a possible successor for the discontinued IS C.
Adding the four-cylinder RC 200t in 2015 was an intelligent move and shows that TMC does see that multiple engine options gives prospects less reason to click away from the configurator. A facelift for the 400A RC comes in 2018 and the replacement in 2021. It will be engineered on an evolution of the platform of next year’s LS.
LC and LS
Lexus’ largest sedan is way overdue for replacement, the current model having first entered production at Tahara in 2006. Sales have understandably collapsed (-22.5%) with just 3,768 sold in the US, the largest market, for the year to the end of August.
Toyota must make sure the next model is even more advanced than the S-Class, 7 Series and next year’s new A8 if the fifth generation LS is to get back to where generation four was in its best years. Those days, when it outsold the S-Class in the US, are a distant memory.
The design study pictured above premiered at last October’s Tokyo motor show, and the production car should be a world debut at next year’s show. It will use the same GA-L platform as was introduced by the LC 500 and will also have the Aisin-supplied 10-speed automatic gearbox that features in the non-hybrid version of the big coupe.
TMC is also expected to build a version of the LS powered by a fuel cell, as previewed by the LF-FC concept. The hydrogen-fuelled Lexus LS is said to be part of a range of cars which the firm wants to have ready to showcase in time for the 2020 Tokyo Olympic Games. Its on sale date for Japan and the USA is expected to be in 2019 or 2020.
GX / TX
The LS might be the big sedan news for late 2017 but there are also two remaining models in the brand’s armoury, and each is a big money spinner. The body-on-frame GX, twinned with the Toyota Land Cruiser Prado, was at one time due to be replaced by a model called TX. This seven-seater is now said to have been merged into the programme to develop a long-wheelbase RX. As GX sales have risen in 2016, despite the model now being close to seven years old, a replacement based on the next Prado could well be being rushed through product development after all. It would use TNGA-F, a new US-developed frame architecture which will be what the next Toyota Tundra uses as its basis.
Finally, the LX, a giant SUV which is most popular in the US, Russia, the Middle East and Australia. Like the GX, the margins on this ladder-frame 4×4 are as large as the garage any owner needs to park one in. The replacement is scheduled for 2018 and will be manufactured in Japan by Toyota Auto Body at its Yoshiwara plant. A 4.5-litre diesel V8 will likely be offered for the first time, as well as an updated petrol V8. Like the Tundra, the architecture is to be TNGA-F.
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