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Sales drive: Lexus hopes that the next-generation RX350 will reverse the brand's recent sales decline.

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Lexus logo18 Nov 2008

STUNG by diving sales and a bleak economic outlook for the next few months, Lexus Australia is working through clearing current stocks and reducing supply in the coming year to match much weaker demand.

This is despite the arrival early next year of a new version of its traditionally strong-selling RX mid-sized luxury SUV, as well as a much broader variety of the Lexus IS range, which is the company’s second most popular car line.

October’s VFACTS industry results saw Lexus sales decimated by 62.2 per cent against the same month in 2007.

While all luxury vehicle brands suffered large sales losses since the Luxury Car Tax (LCT) threshold increased to 33 per cent on July 1, the affect on Lexus has been more profound.

According to Lexus Australia chief executive, John Roca, the goal is to make a profit despite reduced sales and cut a swathe through stockpiles while providing the same level of after-sales customer service on which the brand has built its reputation.

Protecting resale values for current customers is another priority.

“Frankly, the best-case scenario is for a flat new-car market (in 2009),” Mr Roca revealed. “If we can achieve what we have achieved this year in terms of volume, I think we would be doing well.” To the end of October, Lexus sold 5904 units compared to 7090 units for the same period last year.

“I think the advantage we will have is that we are learning the lessons from this year, and we will have the supply management right, in terms of dealer network and from a profitability base. We are small enough and agile enough to turn that around during this period of time.

“It’s a buyer’s market at the moment and we need it to be because we need to sell all the cars we have in stock at the moment (and) that we have ordered, but in a period of six months we will turn that around.

“Being overstocked is not the ideal situation, so what we’re trying to find is what the natural level is that is required by the marketplace, with a supply-chain ratio where we can make money and, at the same time, keep customers happy – they go hand-in-hand.

“It takes months to do that, and we’re ordering three months ahead of plan, so we don’t have it aligned quite as we should. But that’s only a matter of getting to what we feel the natural level of the market is.

 center imageLeft: Lexus 600h.

“We’re trying to protect the resale value for current owners as well, so we have to get that right. And everybody’s in the same boat I think.” Bolstering Lexus’ 2009 efforts will be a host of new-model activity.

“The (next-generation) RX will be a big seller for us, representing around 40 to 45 per cent of our volumes.

“We’ll launch late February/early March from a retail point-of-view with the RX350 and follow that three months down the track with the launch of the hybrid vehicle.

“So next year is looking good for us as we’ve had a fairly dry spell in terms of product – we’ve had the LX this year but that’s low volume, and the IS F is low volume and that’s supply-restricted, so we haven’t had anything major. Our current RX was launched in 2003, so we’re due for a change.

“That will make a hell of a difference to our dealers, too.

“At the moment it is your bread-and-butter (models) that really matter – cars like the IS, 3 Series and C-class, as well as your mid-sized SUV like the RX.

“Particularly with the RX, we find that we have a lot of loyal customers and our retention rate is very strong.

“While we’ve fallen back from number three to number four luxury car brand in Australia, for a brand that offers (vehicles) in just six segments out of the 15, to be number four and three in the market means we must be doing something right.

“And our focus is not just product, it is a focus on the customer, and what we do with that customer between this sale and the next sale… but, of course, new product helps.” Mr Roca has indicated that a number of special editions will be introduced during 2009 to stimulate interest in the IS.

“Limited editions have been good for that car,” he said.

“We’ll also launch the 250C (hardtop convertible), we haven’t given up on the IS350 (using a variation of the 203kW 3.5-litre V6 petrol engine found in the current RX350), and the strength and result of the IS F (in sales) will determine if there is a market for the IS 350.

“If you look at it from that perspective, in a very short period of time (Lexus is going from) just having an IS 250 sedan to having a convertible IS250, IS F sedan and possibly an IS350 as well.

“Add to that a limited edition, and you start getting a fuller range of IS than just an IS250 – and that will really help us.” However, Mr Roca said that there is no prospect of bringing the diesel-powered IS220d to Australia.

“The IS220d is a vehicle that was specifically produced for the European market and, (but) we’re still focussing on hybrid – I think that is our future,” he said.

“One day, I can easily see a Lexus range of hybrids starting from an entry-level vehicle right up to the LS.” Mr Roca is not through with lobbying the Federal Government about changing the LCT exemption level to include hybrid vehicles with the so-called ‘green’ luxury vehicles which can achieve a sub-7L/100km combined average fuel consumption result.

The company's German rivals all have turbo-diesel models that qualify for the LCT exemption, but the RX400h, GS450h and LS600hL hybrids do not as they average 8.1, 7.9 and 9.3L/100km respectively, even though most beat their respective rivals for carbon dioxide and nitrogen oxide emissions.

“We have lobbied, and we will continue to do so,” Mr Roca said.

“The difficulty for us is that we are a little bit of an island when it comes to hybrid as we are the only luxury brand to offer it, but I think you will find that when our competitors start launching hybrid in their range the voice of hybrid will gain momentum and move forward.

“For me, it is not what goes into the fuel tank (that matters) but what comes out of the exhaust pipe. And, if you look at the government’s website for green cars, out of the top 20 cars listed, in which we have three, none of those vehicles were exempted in any way.

“So I think we need to lobby, but frankly I think the LCT is not a fair tax anyway...

“We lobbied with the FCAI at the time, and we will continue to do so. If we are really going to get serious about a green policy for the car industry, hybrids hold a pretty good argument.”

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