Toyota North America CEO Jim Lentz Discusses Lexus Brand Strategy

[krew]

krew

How Lexus can compete with the Germans.

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[Izzam@RegencyAuto]

At this point it looks like Lexus is ready be a leader against the brands that are not moving down market. BMW and Mercedes both don't have to worry about brand overlaps like Lexus to Toyota so they need to chase volume entering lower price point products and this helps them with global sales. JLR and Porsche would be great choices to turn their guns to. Porsche is profitable and just getting into the SUV game (a game that Lexus is already strong in). JLR a strong SUV brand and Lexus already has them chasing them. The new RX, LS and LC are proof that Lexus is a real premium brand and can offer something ultra luxury like (Bentley and Rolls Royce) for under a third the price. The struggle for Lexus is the demand for the brand in the US is so strong. The ES is third best seller in a declining segment which is not the case anywhere in the world even in it's neighbor Canada. Growing globally is tough with USA needs being different and trying to increase production levels for a growing USA demand on top of that. It's a good problem to have since the new brand direction is so desirable and Lexus has been doing all the right things since day one. It's AMAZING how young the brand is eh?

 

[mediumhot]

Since he is talking in first person like he is Lexus then I guess it's OK for him to take the sole blame on himself why Lexus has been struggling with RWD sales and premium technology, basically with everything that differentiate it from Toyota.

And in the last sentence he basically told you Toyota rebadges are the way to go as they yield more profit and volume.

 

[Gecko]

And in the last sentence he basically told you Toyota rebadges are the way to go as they yield more profit and volume.

Thats how I took it as well, and I'm honestly far less enthused. I think Lexus has made half assed efforts in a lot of segments for a long time, so if they're just going to focus on "segments where they can succeed" it's hard to understand exactly what that means.

I said something similar in the "Future of Lexus" thread, but a lot of us have no problem with Toyota-based products like ES and RX so long as we get exciting products like GS, LC, LS, RC, etc. My fear is that Lexus is about to say, "Damn... we haven't ever been successful with GS, GX or RC," and go with "ES and RX work well for us." That's not a premium strategy. A company like Acura, Infiniti or Genesis would die to have the ~1,500 GS sales and ~2,000 GX sales a month... but those numbers just pale in comparison to RX and ES. So what is "success" to Lexus?

Wiping out premium, differentiated products like GS, GX or RC puts Lexus halfway between Acura/Infiniti and BMW/Mercedes - not above them, despite any rhetoric from Jim Lentz.

As an example, Lexus pioneered the crossover luxury SUV and has since fallen on their laurels. They have no RWD-based performance crossover like an X5 or Cayenne, and for god's sake, Jaguar is about to come out with an F Pace R. Lexus never even tried in this segment, so I assume their philosophy now is going to be, "we are successful with RX and NX - those work for us, so that's where we will focus" instead of growing into some truly premium segments like high performance, higher performance crossovers, four door coupes, etc.

LS and LC are outliers and seem to show that Lexus is at odds with what I spelled out above, but I also think that Lexus feels like having those two cars is an excuse for not having things like GS and GX, and quite frankly that is wrong. Those two vehicles are the middle "core" of Lexus that builds up to a LS/LC experience. RX is a $50k SUV. LX is $100k. What is Lexus plan to bridge the gap... RX L? Give me a break.

 

[mikeavelli]

Yeah I'm concerned with the comment that since they don't do huge volume worldwide as the Germans they won't enter more niche's. I understand in Europe BMW/Benz/Audi is like a GM or Ford but Lexus needs to get in some markets like a RWD or F model SUV, 4 door coupes, 4 door suv coupes etc. That is what the market wants.

What is Aiko's take on all this I wonder? He said Lexus is his baby. Yet last year he introduced the Camry and not the LS which still was a head scratcher to me. I think not having a V-8 in your flagship is just a big omission, no getting around it.

What Lexus needs is a product onslaught right now!

BTW is it just me or the LS really growing on me. Looks amazing in that picture.

 

[Dreski]

At this point it looks like Lexus is ready be a leader against the brands that are not moving down market. BMW and Mercedes both don't have to worry about brand overlaps like Lexus to Toyota so they need to chase volume entering lower price point products and this helps them with global sales. JLR and Porsche would be great choices to turn their guns to. Porsche is profitable and just getting into the SUV game (a game that Lexus is already strong in). JLR a strong SUV brand and Lexus already has them chasing them. The new RX, LS and LC are proof that Lexus is a real premium brand and can offer something ultra luxury like (Bentley and Rolls Royce) for under a third the price. The struggle for Lexus is the demand for the brand in the US is so strong. The ES is third best seller in a declining segment which is not the case anywhere in the world even in it's neighbor Canada. Growing globally is tough with USA needs being different and trying to increase production levels for a growing USA demand on top of that. It's a good problem to have since the new brand direction is so desirable and Lexus has been doing all the right things since day one. It's AMAZING how young the brand is eh?

I have to respectfully disagree with your assessment. His interview was pretty gloomy. Its like trying to talk to someone who is losing a game by 30pts.. Toyota & Lexus. Aside from several noteworthy models don't have much else.

 

[Dreski]

Since he's the Toyota N.America CEO, he's to blame for the huge decline in sales because they admittedly said "We predicted the market incorrectly". He can battle the F-150's,Silverado,Rams,GMC if they updated the ancient 12yr 4.7/5.0 V8 which has the worst mileage. N.America wants their DIESEL, longer beds, lockers, premium cabin, 1500, 2500, 3500, HD's. Options options options. But its been 10yrs of doing things wrong. You can't keep saying we won't change a thing cause we have the most reliable trucks. Thats a decade or more which they could have capitalized and market grab from the big 3. I keep talking about this because you guys have to understand Toyota's philosophy with Trucks sales in N.America. Their mentality is completely wrong and that place is being run by buffoons. Truck segment is the most profitable area for Toyota to cash-in. (Even mercedes is thinking about a premium truck. That's another story) Yet, Toyota is so deaf to what is trending and what consumers demand.

This really does relate to Lexus. Lentz, is the man in charge. He maybe excellent at operations but he sure is blind to what is hot, and what will sell. You can't rest on your laurels in the car industry. The excuse for "We can't compete because we don't generate enough sales". That's a lot of baloney!. Toyota/Lexus have armies they can hire to compile data sets on every market trends. They have access to motoring journalist and popular forums, bloggers, car enthusiast etc... They have the best engineers. So where is the problem? Strategy is so wack. Toyota was just named the #1 Car brand in the world w BMW right behind it. 3 superstars don't win you anything anymore. Your bench needs to be good. A Performance division w real muscle compliments that overall team. Lentz is fumbling the Lexus brand at the moment & pissing off Toyota trucks owners.

 

[Once Bitten]

Unfortunately, Lexus seems to be in no mans land currently - They seem to have no idea which direction to head in. Akio says he wants performance cars, but they produce performance cars that are a decade out of date when they launch. The Development Strategy is too slow, and very slow to react to market shifts. The Hybrid system is terribly underdeveloped, and is being blown away by newer competitors.

I think they sit between Premium Toyota and all out Luxury competitor in Strategy. The RX is lovely and a good competitor, the NX is basically a an upmarket RAV 4. They need to jump one way or another - Are you an upmarket Toyota or are you a genuine Luxury market competitor (I don't mean anything to do with the way they are built which is exemplary, more brand image, product and marketing strategy).

At the moment there is not many reasons to step out side the Germans particularly Mercedes, such a great modern range it has a seat for everyone. If it wasn't for Lexus Service and Reliability there would be no real reason to buy them.

 

[PeterF]

This interview does not make me think "experience amazing"

 

[mediumhot]

Unfortunately, Lexus seems to be in no mans land currently - They seem to have no idea which direction to head in. Akio says he wants performance cars, but they produce performance cars that are a decade out of date when they launch. The Development Strategy is too slow, and very slow to react to market shifts. The Hybrid system is terribly underdeveloped, and is being blown away by newer competitors.

While both Akio and Lentz publicly come off cocky how they have the final saying in product development it's obvious they don't. Toyota is not a one man show. I'm sure at this point Toyota is self sustainable so no matter who is at the front, it could be you or me, the show will go on and Toyota would remain successful for decades to come. What Toyota has is beyond business culture it's like damn thing is alive Benefits of such thing are obvious to everyone, cons in my opinion are slow development, adjustment and putting all-in into new frontiers (playing it too safe: decades after Prius hybrid revolution era Toyota's line up is still not hybridized even though they talk about it all the time).

Toyota has the comfort now to play their own independent game however they want, but Lexus doesn't. Lexus is emotional product and needs to be one man show with passionate leadership that is brave enough to brake the cultural and development ties from Toyota if needed. Lentz at this point much like Akio is nothing more than a scale in Lexus development. Scale that has to balance between Demand on one plate and Reality on the other. His Demands consist of relevant and irrelevant numbers from past sales, market research, demand of customers translated into fancy wording and God knows what else. Reality consists of what they have in store and what they can do in certain development period. After they weight in and do the balance then they come up with the spec sheet to give to their designers and engineers.

It goes something like this:
DEMAND
I want new GS to be performance and driver oriented car with striking, emotional connection between the human being and the road.
REALITY
Here is 3.5 V6 engine for you to work with to get there. And no you can't design the new engine just yet cause it will break the product cycle and profitability of the old one.

or

DEMAND
I want new RX to feature contemporary cabin that oozes prime and premium when driver and passengers reside in it.
REALITY
Here is Toyota switchgear for you to work with. And no you can't redesign Remote touch yet, have to wait in line with other Toyota parts and portions that need redesign as well.

Of course this is oversimplified but you get the idea of what was going on in development cycle with current GS, IS, NX, RX. Now it seems like they finally ditched that approach with new LC and LS. LC seems like a car made solely by designers and engineers, all of it except drivetrain. LS was made without bean counting that put constrains on "unnecessary" luxury features. If they can trickle that down into lower end line up they will flourish in the long run but I don't expect it to happen. Lexus more than ever now needs to be developed with emotion of their designers and engineers instead of marketing data and constant needs to retain current customers. It needs a prompt restart across the board not just in the limited edition flagship tier but that flagship part is a proof they can do it. Their production spindle grill took 5 years to adopt the final intended shape like on LS, they don't have that kind of time for adopting new technologies and bells and whistles. No more gradual Toyota like approach if they want to salvage RWD lineup.

With emotional RWD products they can easily trickle down into Toyota territory, downscale and cannibalize. People want premium badge and they want it for cheap. They would rather drive hubcap Audi A4 than fully equipped Mazda 6 or Avensis. That's been proven again and again and even Lexus themselves proves that with their barebones IS200t across the world. That's the reason I believe non-american Toyota dealerships should sell first two trims of IS200t and introduce people to their premium badge. Nothing wrong in downscaling.

OK I'm all over the place now

 

[Gecko]

Since he's the Toyota N.America CEO, he's to blame for the huge decline in sales because they admittedly said "We predicted the market incorrectly". He can battle the F-150's,Silverado,Rams,GMC if they updated the ancient 12yr 4.7/5.0 V8 which has the worst mileage. N.America wants their DIESEL, longer beds, lockers, premium cabin, 1500, 2500, 3500, HD's. Options options options. But its been 10yrs of doing things wrong. You can't keep saying we won't change a thing cause we have the most reliable trucks. Thats a decade or more which they could have capitalized and market grab from the big 3. I keep talking about this because you guys have to understand Toyota's philosophy with Trucks sales in N.America. Their mentality is completely wrong and that place is being run by buffoons. Truck segment is the most profitable area for Toyota to cash-in. (Even mercedes is thinking about a premium truck. That's another story) Yet, Toyota is so deaf to what is trending and what consumers demand.
This really does relate to Lexus. Lentz, is the man in charge and he maybe good are operating but he sure is blind to what is hot and what will sell. You can't rest on your laurels in the car industry. The excuse for "we can't compete because we don't generate enough sales". That's a lot of baloney. Toyota/Lexus have armies they can hire to compile data sets on every market trends. They have access to motoring journalist and popular forums, bloggers, car enthusiast etc... They have the best engineers. So where is the problem? Strategy is so wack. Toyota was just named the #1 Car brand in the world w BMW right behind it. 3 superstars don't win you anything anymore. Your bench needs to be good. A Performance division w real muscle compliments that overall team. Lentz is fumbling Lexus brand at the moment & pissing off Toyota trucks owners.

Absolute truth in all of this. "Segments where Toyota hasn't been successful" = segments where Toyota either gave a half assed effort in the first place or hasn't updated a product to be competitive in a decade. All of this is the fault of leadership.

 

[Gecko]

I have lost some faith in ToMoCo's planing cycle for many reasons, but mostly for the fact that their timing continues to be off for about the last 10 years as @Dreski mentioned.

Historical:
10 year old Tundra
10 year old Sequoia
8 year old 4Runner
Weak Tacoma refresh billed as "new"
6 year old Sienna
GR engines had too long of a lifecycle without significant updates (15 years now)
10 year 4th gen LS
Mismanagement of GS line - 300 to 350, 430 to 460 with detuned V8, 4GS debuts with carryover engine and 6AT
RC is a half assed effort - the only reason I can think to use the IS C tub was to support a convertible, which isn't even going to happen now. The car should have been on either the GS or IS platform in it's entirety and that would have made much more sense

Looking forward:
- Toyota is launching a car onslaught in a market that's soft on them: Prius, Camry, Avalon, Supra, LS, LC
- SUV "reboot" starts in late 2018... probably just in time for gas prices to go back up

I hate to be a pessimist, but we've heard ToMoCo say for many years that they are planning "more updates to more models more often'' and that their strategy will allow for faster implementation of new models........ when has any of this actually happened?

"Core" of Toyota/Lexus:
Corolla
Camry
Rav4
Highlander
ES
NX
RX

Those models are what they care most about. Period.

 

[CIF]

I agree with most of what has been said in this thread.

I only have a few things to add myself.

With regards to Akio Toyota or Jim Lentz and how they are only single cogs in the Toyota corporate machine...that's not entirely true in the case of Akio Toyoda. Yes it is true that Akio Toyoda does not have all-powerful influence in the company to do whatever he wants. However he still has a fair amount of power, influence to make decisions and get things done. Furthermore, the Toyoda family itself still maintains huge influence over the company itself. Akio Toyoda almost single-handedly got the greenlight for LFA production and development. Akio Toyoda played a huge role in the the development and greenlighting of the IS F and the F sub-brand. Without the influence and power of Akio Toyoda (an influential Toyoda family member) to push those products through, bean counters guaranteed would have never greenlighted the LFA or IS F or other F cars in the first place. Let's remember the famous fact the LFA project never made any profit. Even at the very high MSRP LFAs were sold at, Toyota was still selling them at a loss. In the history of Toyota, that is very, very unusual for a product like that to have made it to market.

I would say the key question is not so much how much power and influence Akio Toyoda holds...but what EXACTLY is the view and perspective of Akio Toyoda lineup-wide for the Toyota and Lexus brands? It is well known Akio Toyoda is a racing and car enthusiast. He loves rally racing and endurance racing, and that is a big reason why Toyota returned to the World Rally Championship racing series after many years. That's also a big reason why Toyota years ago left F1 and re-entered FIA sports car racing with the WEC and Le Mans. So regarding this key question, the answer really would clarify a lot of the concerns and doubts many of us fans, owners, enthusiasts have. Does Akio Toyoda personally only like or care about mainly cars, and not care for crossovers, trucks, SUVs? If so, that would explain a lot of things about the current Toyota and Lexus lineups.

A smaller but also important and related question is, regarding the claimed greater autonomy different world regions have in Toyota to make product decisions within the Toyota and Lexus lineup, how much influence and power does the leader of a region really have, say someone in Jim Lentz' position? Let's say for example Jim Lentz is hearing some overwhelming demand for certain products from consumers and dealers and voices that to Akio Toyoda, but it relates to products that Akio Toyoda has little interest in....well what happens then? If I had to guess, those products have less priority in the company. Some products may have no priority at all, depending on how big the overall priority list is.

 

[Rob Grieveson]

I am an outlier here i think for i do not mind that Lexus products run on longer periods than average, what i mind about is that the Lexus product is extra special.

And here i think they need to sharpen up a bit the CT in particular just was never quite special enough it lacked the finesse it needed to be a winner. Not all of us are speed freaks but many want to own a special once in a lifetime car and therefore i would like to see Lexus aim higher than they already do and then in this market Sales figures are simply not a discussion point. (To be honest the Three, C and A4 cars are really only slightly better cars than a Camry if in fact any better? they simply have a different approach to market based on a Sportier and European approach).

If Lexus replace the CT it must be special and unique not a dolled up Prius although no doubt that vehicle will be its base. The existing CT never even had a fold down armrest in the rear seat, leather was sub standard and of course it had a limited engine range of one and CVT which is not everyone's cup of tea.

Therefore maybe drop the CT it is hardly ever going to be a once in a lifetime car except if it is really special and as this will be a relatively small car which is not good seller in the USA perhaps a more European take on the design would go down well - it must be jewel like in finish with soft close doors, wonderful motor, silent etc and most importantly must be more expensive and more unique all round than other products that are available in this segment. It must in fact be the car you simply have to have. Budget your sales forecast to your desired market share keep it special. Special and sophisticated with unique paintwork etc. Lexus you can do this! Lexus must aim to be even more than they are now a must have luxury car that simply does everything very well, the price will fade into insignificance if the car is good enough.

Porsche have done exactly this with the VW range of vehicles e.g. Macan and Cayenne are dolled up VW but my word they are really dolled up ok!

 

[PeterF]

I have lost some faith in ToMoCo's planing cycle for many reasons, but mostly for the fact that their timing continues to be off for about the last 10 years as @Dreski mentioned.

Historical:
10 year old Tundra
1
........
Mismanagement of GS line - 300 to 350, 430 to 460 with detuned V8, 4GS debuts with carryover engine and 6AT
RC is a half assed effort - the only reason I can think to use the IS C tub was to support a convertible, which isn't even going to happen now. The car should have been on either the GS or IS platform in it's entirety and that would have made much more sense

....

I hate to be a pessimist, but we've heard ToMoCo say for many years that they are planning "more updates to more models more often'' and that their strategy will allow for faster implementation of new models........ when has any of this actually happened?

.

yes, depressing. I keep hoping that they will upgrade the GS and put it on the new GAL platform and increase performance in the GS F, but I fear that they will cancel the GS line entirely

 

[Ian Schmidt]

I am an outlier here i think for i do not mind that Lexus products run on longer periods than average, what i mind about is that the Lexus product is extra special.

Agreed. Lexus has been hit or miss on making vehicles that have that proper "Lexus-ness". The LS, LX, GS, and GX are basically never in doubt there. The current ES and RX pass after an up and down history. The NX fails on that metric for me, and so did the CT and HS. I haven't gotten seat time in my namesake the IS recently so I can't say there, but if @mmcartalk has a judgement on that I'll accept it.

One effect of how well executed the LC has been is to make the mishandling of the RC crystal clear. The racing versions have been the one real bright spot there, but let's make the streetgoing car awesome too.

Regarding the Tacoma and Tundra, I've always wondered what kind of autonomy Toyota North America has on those. It should be their baby with no interference from Japan, but I somehow doubt that's the case.

Krew should try to get Mr. Lentz on the podcast, I'm sure everyone would have some, ahem, fun questions for him.

 

[krew]

And in the last sentence he basically told you Toyota rebadges are the way to go as they yield more profit and volume.

Thats how I took it as well, and I'm honestly far less enthused. I think Lexus has made half assed efforts in a lot of segments for a long time, so if they're just going to focus on "segments where they can succeed" it's hard to understand exactly what that means.

I said something similar in the "Future of Lexus" thread, but a lot of us have no problem with Toyota-based products like ES and RX so long as we get exciting products like GS, LC, LS, RC, etc. My fear is that Lexus is about to say, "Damn... we haven't ever been successful with GS, GX or RC," and go with "ES and RX work well for us." That's not a premium strategy. A company like Acura, Infiniti or Genesis would die to have the ~1,500 GS sales and ~2,000 GX sales a month... but those numbers just pale in comparison to RX and ES. So what is "success" to Lexus?

I have to admit a mistake -- I accidentally moved Lentz's words around in my post. Here is the actual quote:

I think the brand strategy is, even more so than the Toyota side, to make sure that we produce vehicles that consumers love. I don't have the scale that the Germans do on a global basis to have as broad of a lineup. It's a very, very difficult thing to do. They probably sell globally twice what I do and it allows them to have a lot more derivatives.

So, I have to make sure that I am extremely competitive in the right segments on the luxury side and that I can bring out new products with things like TNGA and new engines as rapidly as I can to make sure I satisfy customer needs. It's not about necessarily chasing volume, and it's not about driving your product downmarket, either.

I apologize for this, as it changes the complexion of what Lentz is saying.

Here's the thing -- I get the feeling that all of us are so tuned into Lexus that we focus on the future rather than the present. Think about the vehicles Lexus has actually released lately, and it's a flagship coupe and a flagship sedan. We may complain about engines, but one of these cars is equipped with a brand new twin-turbo V6 and both will be available with an new (and advanced) hybrid system.

For years, we've been discussing the duplication of the ES & GS -- I think we all assumed it would be the GS that survived, but it's hard to fault Lexus for choosing the model that sells better. Again, this is pure speculation and nothing has been confirmed.

Why would Lexus cancel the RC when so much of their racing strategy depends on the model? The production coupe may be flawed with its abysmal weight, but it's still an important segment for the brand and should benefit from a new generation that lines up better with the LC.

The GX, well, that one's a puzzle. The upcoming RXL encroaches on its territory, but did any of us expect the GX to last this long? I personally thought it was going to be cancelled three years ago.

Lentz's comments were not great, but they were also riddled with errors and obviously from someone spending all their time on the Toyota side. The gross miscalculation of German sales figures, referring to the new platforms as TGNA and not GA-L, these do not inspire confidence that he's completely tuned into things.

However, there are some obvious talking points here -- make vehicles that consumers love, don't focus on volume, compete in the right segments, and refuse to go downmarket. Isn't this exactly what we want Lexus to do?

I'm just not getting the pessimism here.

 

[krew]

This interview does not make me think "experience amazing"

This interview does not make me think Lentz is all that familiar with what Lexus is doing.

 

[Ian Schmidt]

This interview does not make me think Lentz is all that familiar with what Lexus is doing.

I got that too. For all his cheerleading about bringing Toyota North America together he doesn't seem to have much idea what's going on at Lexus; maybe having everyone together will educate him on that.

But mostly it's important to remember that Lentz has effectively no influence on Lexus product development. He takes what Japan gives him. And what Japan has on offer that we actually know of (as opposed to speculation) is pretty sweet: the LC and LS are effectively re-launching Lexus with the best duo the brand has had since the LS400/SC300 1-2 punch of the 90s. Let's see if that filters down or not before we all get on the BMW new-engine-every-15,000-miles treadmill ;-)

 

[bogglo]

The new camry has a 300hp V6 engine. Am assuming the next Avalon and ES should be making more than that. So now am really curious about the next IS and GS.