Lexus Sees Strong Growth in Latin America

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http://www.autonews.com/article/20161218/GLOBAL/312199919/lexus-plants-seeds-in-latin-america
Luxury brand's sales rise amid a bleak economy

SAO PAULO -- Amid the bleak economic landscape of South America's fallen giants, Lexus is carving out a niche that it hopes will flourish when the boom-and-bust cycle inevitably turns.

A latecomer to the market, Lexus has seen sales in its Latin America region -- which includes South America, Central America and the Caribbean -- rise by 32 percent so far this year, on top of a similar performance in 2015, Lexus executives said. It has been the fastest-growing region for the brand globally over the last two years.

There's a catch.

Those impressive numbers came from just seven dealerships in seven major cities with total sales estimated at about 2,100 vehicles by year end. Lexus' regional market share in the luxury segment grew to 2.9 percent this year from 1.9 percent in 2015.

"It's not huge," said Jaycie Dane, general manager for Lexus in the Latin America and Caribbean region, on the sidelines of last month's Sao Paulo auto show. "We want to establish ourselves as the No. 1 brand for customer experience. If that gets us to huge volume one day, awesome!"

Lexus has a single dealership in major cities of Brazil, Chile, Peru, Bolivia and Costa Rica. Temporary stores in Panama and the Dominican Republic will move into proper showrooms by mid-2017.

Lexus' sales are a small fraction of market leaders Mercedes-Benz, BMW and Audi, all of which have factories in Brazil that enable them to avoid a 35 percent import tariff on key models. Jaguar Land Rover also opened a plant there in 2016. Brazil is by far the region's biggest economy, which doesn't include Mexico because it's part of North America.

Dane, an American who has held several sales positions with Toyota in the U.S., said Lexus is competitive on core models even though all of its vehicles come from Japan and must pay the import tax in Brazil. Other Latin American nations don't have the tariff, which helps level the playing field.

The NX crossover, which was introduced in the region in 2015, quickly has become the brand's most popular model in Latin America and competes on price with the best from Germany and the U.K., she said.

"Is it perfect on every model? No," Dane said. "But on our core models, our volume models, we work to be as competitive as possible."

Lexus didn't launch in the region until late 2012, mostly missing the commodity boom that had made Brazil and some of its neighbors among the fastest-growing economies in the world. Brazil auto sales that year were a record 3.8 million vs. an estimated 2.1 million for this year.

While Brazil's sharp recession has been the most notable because of the nation's sheer size, economies throughout the region have been contracting. Even the exceptions, such as Peru and Bolivia, remain delicate because of weak commodity prices.

Still, Dane said, there are reasons for optimism going into 2017, and Lexus plans to add a smattering of new dealerships across the region to take advantage of the improving economic climate and the strength of the luxury segment in particular.

The general auto market was down 20 percent in the region last year while the luxury market grew 15 percent, she said. About 70 percent of consumers moving into the luxury market are coming from nonluxury -- a huge pool of young, wealthy customers.

The mood at the Sao Paulo show -- the premier event for the region -- was noticeably more upbeat this year than previously, attendees said. And the local unveiling of the hybrid version of Lexus' new halo car, the LC 500 coupe, drew lots of media attention.

"We do plan on growing," Dane said. Peru just opened a second location, and Chile is looking at a second store as well. "And then in Brazil, we're going to be moving from one dealership to 10 dealerships next year."

Argentina, another top economy in the region, recently removed a high luxury tax. That has Lexus looking at a possible launch there.

Expansion of the brand to still more countries could be in the cards, but its focus for now will remain on sustainable growth, Dane said.

"Anytime we've gone to a new country, globally, our goal is to have profit after three years and a return on investment after four years," she said. "And we are achieving those goal here."
 

mmcartalk

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Interesting article (and a good post), but one question that the article doesn't seem to address is if Lexus makes any engines for the Brazilian market that can run on pure ethanol (E100) or high ethanol/gas-mixtures....both of which are quite popular in that country. My car, for example, with a GM power plant, can handle E85 (85% ethanol) ...........but I'm not sure about most Lexus engines.
 

Carmaker1

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I had thought that Lexus already had a presence in South America via Brazil as far back as 1999-2000?

It is good for them to expand, as it is the primary reason why total global sales pale in comparison to German luxury brands.

Not to go too off-topic, but I must stress that Lexus really needs to expand into the Carribean, the major cities of the tropical Americas, developing Asia, and African metropolises.

I just arrived into Lagos, Nigeria in West Africa for a visit, after briefly visiting the states (Atlanta), and as usual I am astounded at the heavy amount of Toyota products on the ground here.

1 out of 3 cars on the road here is a late model Toyota or a Lexus. I am personally being driven around in our family-owned LX570s, a GX460, as well as a Hilux and Prado GXL. Besides this one, there are many other LX570s, GXs, Land Cruiser V8s, Prados, and RX350s (plus a few NXs) in traffic here.

I already counted 15 late model LX570s (2012-present) and 32 Lexus SUVs total just driving out of the airport on the freeway. Lexus is seriously missing a big market here, considering the many grey market imports I observe each time I visit parts of Africa.

The fact that Jaguar Land Rover, Porsche, and Rolls-Royce have official retail centres here in two different cities, yet Lexus does not have a single one is laughable. South Africa should not be the only country that officially sells and services Lexus.

This is why I feel that using official sales as a measure of relevance in the luxury sector doesn't provide a full picture. Until they stop taking this overly apprehensive approach, no one can hope for them to be on the same global level as MB or BMW.
 
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meth.ix

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Sort of off topic, but I just found out that Lexus stands for Luxury EXports United States from when it was just luxury brand of Toyota in the States.
 

Rob Grieveson

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I had thought that Lexus already had a presence in South America via Brazil as far back as 1999-2000?

It is good for them to expand, as it is the primary reason why total global sales pale in comparison to German luxury brands.

Not to go too off-topic, but I must stress that Lexus really needs to expand into the Carribean, the major cities of the tropical Americas, developing Asia, and African metropolises.

I just arrived into Lagos, Nigeria in West Africa for a visit, after briefly visiting the states (Atlanta), and as usual I am astounded at the heavy amount of Toyota products on the ground here.

1 out of 3 cars on the road here is a late model Toyota or a Lexus. I am personally being driven around in our family-owned LX570s, a GX460, as well as a Hilux and Prado GXL. Besides this one, there are many other LX570s, GXs, Land Cruiser V8s, Prados, and RX350s (plus a few NXs) in traffic here.

I already counted 15 late model LX570s (2012-present) and 32 Lexus SUVs total just driving out of the airport on the freeway. Lexus is seriously missing a big market here, considering the many grey market imports I observe each time I visit parts of Africa.

The fact that Jaguar Land Rover, Porsche, and Rolls-Royce have official retail centres here in two different cities, yet Lexus does not have a single one is laughable. South Africa should not be the only country that officially sells and services Lexus.

This is why I feel that using official sales as a measure of relevance in the luxury sector doesn't provide a full picture. Until they stop taking this overly apprehensive approach, no one can hope for them to be on the same global level as MB or BMW.
I have to agree and furthermore the marketing effort by Lexus in South Africa is frankly pathetic - and yet Toyota themselves lead the sales in SA every second car is aToyota product be it a Quantum taxi, Fortuner, Corolla etc and it would appear that the Toyota agents do not support Lexus as they should keeping re sale values low and generally pushing Toyota above and beyond Lexus which does not make a lot of sense in real terms. We do not get the Camry out here anymore so the IS is the nearest medium size saloon Toyota have out here and it is not selling in huge quantities although gradually we are seeing more Lexus products on our roads and they are building a good name for service and reliability. So the re sale value will improve despite Toyota telling everyone to rather buy a Toyota as their resale value is top of the pile here.
 

bogglo

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In African countries and I mean any African country, seventy percent of the cars are from Japanese auto maker out of that 70% Toyota/Lexus is like 30%. So, Yes I agree. The only problem is the cars in most African countries are not brand new, and you have more roadside mechanics than you have car dealerships to fix your car.
 

mikeavelli

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I've noticed in the past 8 years or so that Audi, Benz have new dealerships in Kingston, Jamaica and now I see Jaguar/Land Rover. They even have a new Porsche dealer downtown.

No Lexus :( though there are TONS on the island, all imported.
 

mmcartalk

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I've noticed in the past 8 years or so that Audi, Benz have new dealerships in Kingston, Jamaica and now I see Jaguar/Land Rover. They even have a new Porsche dealer downtown.

No Lexus :( though there are TONS on the island, all imported.


Even aside from Lexus, though, if Jag, Land Rover, Audi, and Benz are selling there, that shows that incomes must be starting to rise on some of those traditionally poor Caribbean Islands.