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http://www.autonews.com/article/20180322/RETAIL07/180329977/lexus-rx-l-teamwork-sets-upbeat-tone
LEXUS: RX L teamwork sets upbeat tone
Carl Sewell III is well into his second year as chairman of the Lexus National Dealer Advisory Council as the group celebrates the work it has done with the automaker to bring the three-row RX L crossover to showrooms this year.
Sewell, 34, is also co-president of operations for Sewell Automotive Cos. The dealership group is a 107-year-old family business with 17 dealerships in Texas, including Sewell Lexus of Dallas.
The luxury brand has worked closely with the dealer council to ramp up inventory of light trucks as the industry shifts toward crossovers and SUVs, Sewell said, and a steady stream of new offerings sets an optimistic tone for 2018.
"I think it's going to be a great year with the model launches we have coming," Sewell told Staff Reporter Laurence Iliff.
AUTOMOTIVE NEWS: How best can the factory help dealers sell more vehicles? Are they getting enough support?
CARL SEWELL III: Yes, absolutely. That really goes back to product and the right days supply in the right segment and making sure we're competitively priced and have the right incentive strategy and great marketing. And I think those are all things that Lexus does very well, and so we think Lexus does a great job.
Q: How was 2017 for Lexus dealers?
A: 2017 was a great year for Lexus. Fourth consecutive year over 300,000 sales. Best-ever Lexus luxury utility vehicle sales at just under 200,000 vehicles. We were the top brand measured by J.D. Power CSI, and I think most importantly, in the last quarter we were really able to get inventory and days supply in line and we've gone back to that "one too few" [inventory] mindset, which I think is part of the lifeblood of the luxury brand and particularly of the Lexus brand. It's a great platform for 2018 to launch on given all the products we have coming.
What major problem do Lexus dealers face in 2018?
Like all OEMs and brands, this shift from passenger cars to SUVs has been so dramatic and I think it's pretty clear that it's here to stay in a lot of ways. And so, we're highly focused on expanding our LUV/SUV lineup and I think the LF-1 Limitless concept certainly shows that's something that we as dealers would love to have in our showrooms at some point. But obviously it's in the concept stage now. If you think more about today, NX is a vehicle as an example that's just doing incredibly well. We would love to get more production to meet customer demand from that perspective.
I know you interviewed [Lexus General Manager] Jeff Bracken a few weeks back. He talked about something potentially based off the UX concept down the line that would be more kind of entry-luxe from an SUV standpoint, but I think right now it's really making sure our days supply is right, we've got the right models, we're positioned strong for '18, and I think it's going to be a great year with the model launches we have coming.
What do you hope to accomplish as chairman of the dealer council this year, and what did you accomplish last year?
Probably the RX L serves as the best illustration of just the long tradition of the council process with Lexus, and I think it underscores the strong relationship that Lexus has with its dealers. That's a product that we had been talking about for some time, and we worked through the council process, we went to Japan, Jeff Bracken really believed in this product and we all came to the sense that this is absolutely something our customers want and now it's going to be arriving in our showrooms. I think that underscores how the council works and how we work with the brand as dealers.
To me, the kind of forever purpose of the dealer council is to focus on product, profitability and customer experience, and I think customer experience is obviously the foundation of everything we do. And at the same time, we've got to have pretty candid product discussions and we've got to make sure retailers are positioned well with inventory discipline and other things that help run a better operation.
And as I think a little more about product specifically, there are three elements that we're really focused on right now. As you saw with the LF-1 Limitless concept, we want to ensure that while many of the other OEMs are pursuing sort of entry-luxe models, we need to build our presence in the halo model segments. That picture from Detroit with the LS, the LC and the LF-1 in the background with Jeff on stage I think demonstrates what I know every dealer would like to see. As I mentioned earlier, we want to make sure that our SUV lineup is complete and I think this demand shift is here to stay and we want to be able to serve our customers, and so what are other ways to improve our SUV lineup. Then, we've got to expand our performance capabilities across the lineup as well.
If I had to pick three elements: halo and aspirational products; LUV lineup; and then performance vehicles.
Would those be performance sedans or could they also be performance-oriented crossovers?
I think it could be both and frankly should be, given the way the market is going. So, absolutely. And I think the lines and design of that LF-1 certainly lend themselves to a performance variant potentially.
Was the inventory problem more about getting more crossovers and SUVs or having too many sedans?
That was an industrywide problem last year, particularly in the first, I'd say, six months and I think everybody was just caught a little bit with more passenger cars than they needed. As the year progressed, the Lexus leadership team was really able to work hard and reposition production and make sure that by the end of the year — and in the last quarter — we had a more in-line days supply with customer demand, and that kind of set us up for a better start to 2018 as well.
So, inventory is pretty much in shape?
If there were a few little things we would love more of, it's NX and RX and we'll see as RX L launches what demand is. But fortunately, Lexus is very flexible and we think that car has great potential so if we need to build more, we're confident they could get that done and get them to the customers.
Are Lexus dealers happy with the Lexus model of limiting the number of franchised dealerships?
We think that's a wonderful thing about Lexus and the results kind of bear out in the numbers with the highest sales per outlet for luxury franchises and No. 3, actually, when you look across all the brands. That really allows for dealers to invest in their facilities, invest in their customers, invest in their employees and I think that's a big reason why Lexus does such a great job of customer experience because we're able to take care of the customer at a really high level.
Would some dealers like Lexus to add stores so they could expand their business?
Obviously, all of that is determined by Lexus. Probably every Lexus dealer, probably every dealer in the U.S. would raise their hands for a Lexus store. But it goes back to how disciplined do we want to be, what type of business do we want to run and the partnership. I think certainly people would like that but they understand the potential implications as well.
What will the leasing environment be like this year? Are off-lease returns a problem?
Leasing has always been a really important element of the Lexus business and I think we're all very fortunate to have Lexus Financial Services as our partner and as our captive. They do an incredible job. So, we see that as a continuing opportunity for us. On the lease returns, obviously that's a significant opportunity to grow our L/Certified business and our noncertified Lexus pre-owned business. I really think that's an opportunity more than anything else. Some people might be a little nervous about it but we're certainly not. The rebranding of the L/Certified program has been a real success with dealers and customers.
Is Lexus doing anything specific to support dealer profit as sales plateau?
It kind of goes back to those three pillars of the council process and focus. Product and profitability to some degree go hand in hand and when we have the right models and the right days supply and the right pricing, all those things, that certainly helps as markets start to stabilize a little more. That said, when we're launching a RX L and an all-new ES and an all-new LS and then some models in '19 as well, we're certainly not hoping that sales flatten out too much for Lexus. We think there's an opportunity and some upside.
Is the $75,000 base price for the LS a good place to start?
Absolutely, and we're starting to see customers again who we've had for many years and they're coming back because they're really excited about this new model launch, as well as the LC. We've got more presence on the halo end of the spectrum and that aspirational part of the product. LC and LS are certainly bringing back some customers that we're very happy to see.
What has the dealer reaction been to the redesigned LS, RX L and the LF-1 Limitless concept shown at the Detroit auto show?
The LS, everyone is incredibly excited about it. Obviously, the original LS is kind of the heart and soul of Lexus for many years. What they've been able to deliver in this product and at this price is nothing short of extraordinary, and we're seeing incredible customer engagement around it and the dealers are incredibly fired up. And RX L is something that we've been working with Lexus on for several years and Jeff Bracken, the team there, worked with council and all of the dealers. This is a real example of partnership in getting it to market.
And the LF-1, I think all dealers across the country in the Lexus family want to see this car in their showrooms tomorrow, if possible. But obviously there's a long way between concept and any decision that might get made. We've heard about it from customers, it's been covered by Motor Trend, Automotive News and from everybody the feedback has been really good. As that LUV lineup continues to become more important — you've got things like Range Rover and Escalade and F-Pace and all sorts of products — we need to make sure that our LUV lineup is every bit as robust as the competition.
Do you think a crossover is the right vehicle for the entry-level space?
I do. NX has been a huge success. It's already No. 1 in its segment and I think while we've been very focused on the high end over the last few years, there's certainly an opportunity there and we'll see what comes of it. Obviously the UX concept was great and very well received, so we'll see where we go from here.
Could that vehicle bring in younger buyers?
Absolutely. And there's really two ways to do that. You can have entry-level products — and in today's world, particularly, entry-level crossovers — and you can build aspirational products like LC, LS and do things like the LF-1 concept. And that causes younger buyers to aspire to be a part of the Lexus family and maybe they get an IS or an NX, but they know that the badge is also on these halo products. So, there are different ways to do that and I want to make sure we're focused on both ways.
How is service business for Lexus dealers?
It's very good. With Takata sort of consuming a lot of headlines across the industry over the last year, and other things, we sort of live in a time of recalls in this industry. That said, given all that's going on, we were very excited that Lexus won No. 1 in J.D. Power CSI in 2017 and I think that speaks to the incredible focus the dealer body has on customer experience. That said, there's probably an opportunity for recruiting and retaining talented service technicians and service advisers. That's something we've always got to keep our eye on and make sure we do a great job. Lexus as a manufacturer does an incredible job of training and they make sure that the dealership associates are exposed to incredible training opportunities and continuing education.
Are you worried about the loss of the luxury sales crown as competitors go down market?
I think our focus needs to be on the brand. Volume, at the end of the day, I don't think customers buy cars because they know that this brand sold this many cars vs. that brand sold that many cars. I think customers are focused on the product, what the brand means to them, how it resonates, and the dealership experience.
