internalaudit

Admirer
Messages
678
Reaction score
787
I will no longer be defending Lexus profitability after my terrible experience with my ES300h after just four months of ownership. If I were in USA I would be one of those owners who vote down their JD Power ratings.

Lexus heavily pushes its profits by aggressive cost cutting for ChDM where margins for luxury cars are much, much higher than in America. The likes of ES200 and NX200 are the reason why they are so successful. And they are playing a very dangerous game with their cost cutting (most infamously with use of subpar material in those '200' models) and immoral pricing. There will be a breaking point when people are no longer buying the 'made in Japan quality' argument and realize what they are actually buying.

Yes BBA are experts at doing shady stuff in China which is the reason I would buy zero product from them but they can afford to lose a lot of reputation compared to a 'second tier brand' like Lexus. I am terrified by whether they could maintain their reputation for quality while Genesis is improving at an incredible pace in every aspect except marketing. If you look at the JD Power reports their highest rated products are very very old and I am not sure if the same can be said for their newer products, especially when they are almost rushing out a full lineup in the next two or three years.
What issues have you encountered and what short cuts is Lexus employing for ChDM?
 

mikeavelli

Connoisseur
Staff member
Moderator
Messages
4,500
Reaction score
9,032
One thing I will add and I hope it doesn't come off as apologetic. Toyota/Lexus did move from Cali to Texas. That is monumental. It has caused a lot of movement, attrition and retirement. This clearly happened in the past decade and we continue to have aftershocks. So USA really is a different beast. I can only fathom how this affected product.

The second thing is, the USA is no longer the only game in town. Whereas resources and product were solely aimed for the USA, that is no longer the came from engines to products. Look at the Lexus LM and UX EV for example. Sales continue to climb globally and that is a different world compared to here. That makes it more difficult to decide where resources and products go.

Third, related to the second point, from my understanding Japan really is running things, not USA. Thus also the change to "lifestyle" with the LY and marketing efforts. I understand the reasoning, I attack the same way with many of my clients, but a core ingredient is product. Currently, a four door coupe or SUV is a lifestyle product. A Lexus RX is not no matter how you take photos in front the Taj Mahal.

Fourth with the talk about profitability, I haven't seen anything exact, just talk. The thing is for the USA where in the past people bought a Lexus, now they lease a Lexus. In the 1990's I don't even recall a lease program. Today all I see are lease programs. This is not exclusive to Lexus, this is industry wide. Thus companies are squeezed to turn a profit as consumers can nickel and dime dealers with all the data available on forums like this to websites like truecar. Whereas dealers easily made a profit, today not so much. This compounds the problem.

Thus fifth relates to four. You have dealers that want to make more profit and they see that through SUV's. We have heard they declined the RC convertible for the RX L. They want a Escalade sized SUV. Note we haven't heard dealers asking for F cars or more coupes. That is all driven from the manufacturer. So then when those cool products hit, they don't do as well.

Maybe I should apply for a job lol
 

Levi

Expert
Messages
1,000
Reaction score
1,260
I will no longer be defending Lexus profitability after my terrible experience with my ES300h after just four months of ownership. If I were in USA I would be one of those owners who vote down their JD Power ratings.
I am sorry for your negative experience. I hope the issue is sorted out and nothing else happens.

It is true I am worried about TMC's reliability, because if it is not there, there is then not much going for the brand. All other makers are improving hybrid tech and electrification and striving to improve reliabilty, at least under warranty/lease time. Nissan and Honda have fallen in reliability, Koreans are reaching top spots and Germans are improving.
 

Gecko

Connoisseur
Staff member
Administrator
Messages
3,067
Reaction score
6,612
This is simply not true at all. Lexus has always brought dissapropriate amount of net income to TMC, this does not change when they have record sales just because they are cancelling car that was selling badly.

You are looking at it from enthusiast sense, which is fine... but at the end of the day, Lexus had a record sales year worldwide and Toyota as a whole had a record sales and profitability worldwide.

Lexus selling more cars and discontinuing slow selling ones, does not make them less profitable.

So this is probably the most annoying rumor of them all, something that truly irks me... "decade of mishaps and failures".

July 2019

January 2020


- There are some more recent ones but hidden behind the Autonews paywall (New Toyota chief saying Lexus profitability is good but they need new models).
Because Toyota had a record profit year does not mean that Lexus is not losing money. Because Lexus dealers have historically been very profitable does not mean that Lexus as a company is profitable. Because Lexus has a good relationship with dealers does not mean they are filling their pockets with cash. These are all very different things as you are aware, and not necessarily related to Lexus' overall profitability as a business unit.

Of course you know that there are periods of extensive cash outlay for R&D followed by profit from those expenses when products are well received. You pay for expansion, new dealers, licensing and investing in new markets, and much more. I do not want to believe that Lexus is unprofitable because if that is true, it only spells trouble for the brand. I really mean that.

But what I also know is that where there is smoke, there is fire with Lexus and Toyota. Hearing from Johnny Lieberman is one thing. Hearing from employees that "Lexus is always an afterthought with strategic planning," and "Investment in dedicated Lexus models was/is cut because of poor overall performance," tells me there are real problems.

There is no sense in hashing out all of the company's mistakes over the last decade - and what their financial implications could be - it is well versed here. The bigger worry for me is what Lexus looks like in another 3-5 years with slow selling flagships and badge engineered Toyotas. I hear employees say that "around 2025" things will really start to be better... I am just not sure Lexus can wait that long and still bounce back.
 
Top