Quake and Competitors Hit Lexus


Talk about a bad time for bad news.

Lexus, already struggling with limited supply and weak sales is finding itself wrestling with two big problems: rebuilding its inventory after the earthquake hit Japan and fighting off other automakers who are aggressively going after luxury car buyers.

Toyota is intent on overcoming both hurdles, but for now, both are putting the squeeze on America's #1 luxury brand.

Quake impact:

Toyota deciding to halt production in Japan through Tuesday, March 22nd means an already tight supply of Lexus models will become even tighter. As I talk with dealers they tell me Toyota probably has 40-45 days supply of Lexus models. A more normal supply would be 60-65 days. Compounding the issue of a tight supply is the fact 75% of the Lexus models sold in this country are built in Japan. Sure, the popular RX models are built in Canada, and production there is going as scheduled. But all the other Lexus models are Japanese made.

Luxury Competitors Targeting Lexus owners

After a decade long run on top of the U.S. luxury, Lexus finds itself starting 2011 trailing its traditional rivals. Sales this year according to the research firm Autodata:

  • BMW (up) 14.4%
  • Mercedes (up) 9.5%
  • Lexus (down) 9.0%

Sure there's a lot of time left this year, but Mercedes and BMW are aggressively going after sales. According to Truecar.com, incentives right now look like this:

  • BMW $3,450
  • Mercedes $3,000
  • Lexus $1,750

On top of that, BMW and Mercedes are both pushing volume sales programs with their dealers right now. To quote one dealer, "BMW and Mercedes are intent on winning over buyers and the business is coming from Lexus."

With all that said, Lexus is not out of the game.

It has a large and loyal customer base.

It also has perhaps the strongest dealer network in the auto business.

There's a reason Lexus customers come back again and again.

They are taken care of by dealers who understand customer service better than most other dealers.

Their challenge right now is riding out this storm of uncertainty.

Eventually, Toyota will get its Lexus lines moving again in Japan, and when they do, don't be surprised if Toyota kicks up bigger incentives to fight off the challenge coming from its European competitors.

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