WHISTLER, BC, Canada – Despite posting the biggest growth this year among luxury brands, Lexus likely will fall shy of the 300,000-unit mark in 2014, a top brand official says.
Lexus sold 138,689 units in the first half of the year, up 17.1%, the highest increase among premium marques.
“There’s no other competitor in luxury that’s matched (17%) so we feel really good,” Brian Smith, vice president-marketing for Lexus in the U.S., tells WardsAuto in an interview. “But we probably won’t get quite (to 300,000).”
Lexus earlier this year announced a 2014 sales goal of 285,000 and the brand at its current pace is trending to hit 290,000-295,000, Smith says.
Preventing Lexus from selling 300,000 vehicles this year is the brand’s desire for “slow and steady” growth.
Luxury competitors have been resorting to incentives at a higher rate than Lexus, and the Toyota premium marque doesn’t want to jump into the fray, preferring to use them “tactically.”
“All of the luxury brands are much more aggressive in the incentive game,” Smith says, referring to the luxury segment before the 2008 recession. “We’re doing everything we can to control it but it’s definitely a reality now in a bigger way than it was.”
Lexus was the highest-volume luxury brand in the U.S. for much of the prior decade but in recent years was overtaken by BMW or Mercedes-Benz, as the Germans’ vast global volumes allowed them to discount more aggressively.
Despite its desire to keep incentives low, Edmunds’ True Cost of Incentives placed Lexus spiffs mid-pack last month. Lexus’ average June incentive was $2,315, vs. BMW’s $1,469, Audi’s $1,834 and Acura’s $1,541. Mercedes’ average June incentive was $2,582, outdone by Cadillac’s $4,061 and Infiniti’s $3,856.
Leasing drives a lot of the German brands’ U.S. business and Smith says Lexus too is increasing its lease penetration.
“We always maintain a mid-30% range of leasing; now we’re about 50%, and (the) IS (sport sedan and coupe) in particular is over 60%,” he says.
Thanks to lower monthly payments brought about by incentives and leasing, Smith says more Americans are moving up from mass-market to luxury vehicles.
Lexus has been seeing move-ups from owners of Acura, Honda, Nissan, Infiniti and yes even Toyota models, although he claims Lexus is not intentionally targeting owners of its sister brand.
“So I think a lot of our growth is going to come from (move-ups), in addition to holding on to our loyalists,” he says.
Smith is confident Lexus and the entire industry is on a good growth path, but does worry a push to build more cars, and sell them with higher incentives, could be resurrecting bad habits from before the recession.
“I think the one issue that maybe everybody’s worried about is there are forecasts coming of an 18 million-unit U.S. industry, and is that natural demand or are people pushing?
“We’d like it to grow organically, not push too quick too soon,” Smith continues.
Lexus placed third among luxury marques in first-half U.S. sales.
Mercedes-Benz was the No.1 luxury seller through June in the U.S., with 163,107 units sold, up 7.7%. BMW was close behind with 157,382 deliveries, good for a 12.1% increase from the same period year-ago, WardsAuto data shows.