Official Lexus Future Product & Powertrain Megathread

[Gecko]

Can you say that about every Lexus dealer? How many GMs have you spoken to? Honestly, it can't be confirmed but you can't deny, but I'm sure people inside Lexus and Toyota that know aren't talking.

We know Lexus' core is NX/RX/ES, which... on one hand should be profitable because they're based on Toyotas, but on the other hand, they are in extremely competitive (and more price conscious) segments and that tends to not leave much margin for profit. Selling GS, GX, LS, LC, LX type vehicles gives dealers more runway and more profit margin with things like option packages, wheels, upgrades, etc - than lower end products like ES, RX and NX, which are often sold with 1-2 basic level packages.

How do you sell a $7k wheel and tire upgrade package? How about a body kit, spoilers, interior/exterior protection warranties, etc? Custom painted accessories? Generally it's on higher priced vehicles, not one where a tire/wheel upgrade would be 15-20% of the cost of the entire vehicle, like it would be for ES, NX or RX.

So, while we may not know if Johnny Liberman is right or wrong, I do think what he's saying is likely correct with the decline of LS, LC and GS. GX and LX are probably a godsend for dealers, even if they are lower volume.

The other part of this is desirability and "newness." When products are new and fresh, you can charge more of a markup. NX and RX are old, and ES is in a declining segment.

Overall, this is reflective of Lexus' deficiencies and makes sense to me.

 

[suxeL]

Said who? It is simply not true.

While Lexus numbers are not disclosed specifically, it was always cash cow for Toyota and they often referred to it as such.
Lexus dealers are certainly happiest and most profitable in the industry (you can check industry surveys that confirm that). Toyota is most profitable car company in the world, by far.

I am not sure why would you think Lexus is somehow unprofitable, because low selling GS is cancelled? While they are having record sales?

2018 Sales Figures (USA) 2.3%

Lexus December 2018 & Year-End Sales Report

Overall sales down 2.3%.

lexusenthusiast.com

2019 Sales figures (USA) 0.6%

Lexus December & 2019 Year-End Sales Report

Just missed the 300k mark in the USA.

lexusenthusiast.com

Toyota to Discontinue Land Cruiser in USA, Focus on Lexus LX?

So says Motor Trend.

lexusenthusiast.com

The GS is a recent event that further solidifies this but unfortunately this opinion is based on previous reports I have listed.

The product maps thus far, shows Toyota is heavily invested in prioritizing itself over its "cash cow" Lexus which makes one have to wonder why?

 

[internalaudit]

Maybe Lexus should focus and use the Macan or Cayenne (okay, even the X3 M and X5 M or the SQ5) as its SUV benchmark, except keep the better steering feel and don't adopt the BMW numbness. Rather than benchmark Toyota products and make them 30% better?

Also, Lexus doesn't seem to take the Toyota approach to volume-selling. In Canada, it has an infrequent once in a year incentives for one-year old models (say 2019 in September/October 2019) where the lease or finance rates are dropped by 2-2.49% plus a few thousand cash incentives.

It's also very conservative with its lease-end residual values (leading to higher monthly payments) and so many used car dealerships will buy these leased cars cheap and then add in a significant profit.

The only approach that makes sense if I am shopping for a used Lexus is to check the Leasebuster.ca site and check out potential Lexus takeovers (short term remaining) as buying it out would be my goal. Trying to scour used car sites can have that potential diamond in the rough too but dealer margins add 10-15% to the asking price.

Lexus should offer more competitive financing/leasing terms and rates and maybe discount the cars less. That will definitely pull borderline entry luxury car buyers like me into the fold more easily since I do keep cars for a long time but I know anything over 3% interest is going to cost me a pretty penny on interest charges. Even Apple has been offering 12 or 24-month no interest installment on its iPhones for two to three years now in the US. North Americans like to stretch themselves thin financially when shopping for luxury goods. Lexus is a luxury good too.

But yeah product life cycles are so long, it sucks for someone leasing an IS to find out eight years later, the same IS is still being offered. For those who bought in the first or second year, it makes their purchases look astute lol.

Update:

Yeah, I've just been thinking. If many Lexus owners keep their cars for much longer periods (this is just an assumption) and if Lexus was really a cash cow, I'm surprised they don't offer below 2% 84 month financing for Lexus vehicles. Would a behemoth such as Toyota not have access to cheap financing? I'm sure the magical 30-year mortgage rate is the benchmark for Americans thinking of financing and I believe it hit a new low of 3.30% last month. Any rate lower than that is a decent borrowing rate. Lexus doesn't have to match Genesis' 0% rates as they still need some catching up (I hope).

I think I would be inclined to purchase a new $80k Lexus (even a little over my budget) AWD BEV if that was offered. But if the rates are 4% and up for Canada, I would rather someone eat up the depreciation and financing cost first, take over before lease end and buy it out right after..

 

[LexsCTJill]

Can you say that about every Lexus dealer? How many GMs have you spoken to? Honestly, it can't be confirmed but you can't deny, but I'm sure people inside Lexus and Toyota that know aren't talking.

Spwolf is so right. Lexus does not have an overabundance of dealers. There are many dealers that have exclusive territories. I think Lexus has been at 275 nationwide dealers for 20+ years. Many were owned by the same owners as Toyota.

 

[spwolf]

Can you say that about every Lexus dealer? How many GMs have you spoken to? Honestly, it can't be confirmed but you can't deny, but I'm sure people inside Lexus and Toyota that know aren't talking.

yes, because there is industry survey that says that Lexus dealers in USA are #1 in satisfaction with their brand, and one of the main reasons is best profitability. Winner is always the same in the US - Lexus.

So yeah, of course it can be confirmed.

 

[spwolf]

The product maps thus far, shows Toyota is heavily invested in prioritizing itself over its "cash cow" Lexus which makes one have to wonder why?

Land Cruiser is probably the biggest cash cow that Toyota has, and it will have 10+ year product cycle. Yaris sells 700,000 units globally, and it will have 9 year product cycle.

You can also say they prioritized UX, LS, LC or RX-L for instance, instead of working on global Toyota products like Land Cruiser or Yaris.

So pretty sure above is not true.

 

[spwolf]

Yeah, I've just been thinking. If many Lexus owners keep their cars for much longer periods (this is just an assumption) and if Lexus was really a cash cow, I'm surprised they don't offer below 2% 84 month financing for Lexus vehicles. Would a behemoth such as Toyota not have access to cheap financing? I'm sure the magical 30-year mortgage rate is the benchmark for Americans thinking of financing and I believe it hit a new low of 3.30% last month. Any rate lower than that is a decent borrowing rate. Lexus doesn't have to match Genesis' 0% rates as they still need some catching up (I hope).

You have great financing deals when you are desperate to sell cars and then lose your profitability. Not other way around - you are not profitable if you sell cars with huge incentives.

This is why Toyota has 2.5x bigger profit than BMW and Mercedes combined for 2019.

 

[Tragic Bronson]

yes, because there is industry survey that says that Lexus dealers in USA are #1 in satisfaction with their brand, and one of the main reasons is best profitability. Winner is always the same in the US - Lexus.

So yeah, of course it can be confirmed.

You have great financing deals when you are desperate to sell cars and then lose your profitability. Not other way around - you are not profitable if you sell cars with huge incentives.

This Lexus dealer must really hate their corporate overlords because they are selling their cars with 0.9% financing. This is just Canada. If you go to the US, you pay 0%, which I guess is even more desperate.

This is why Toyota has 2.5x bigger profit than BMW and Mercedes combined for 2019.

This thread is about the US sales stall about the brand, not about the worldwide sales surge. You can start a separate thread for Lexus Europe. So how does profitability correlate with US sales?

 

[Tragic Bronson]

Spwolf is so right. Lexus does not have an overabundance of dealers. There are many dealers that have exclusive territories. I think Lexus has been at 275 nationwide dealers for 20+ years. Many were owned by the same owners as Toyota.

In Canada, yeah. It seems that every Lexus store is side by side to a Toyota one. But this isn't always the case here in the US, and frankly I don't see what the correlation to the topic here, which is the sales struggle.

 

[suxeL]

And I would love to discuss the success that those TOYOTA models have as a result of being prioritized over the so-called "cash-cow" Lexus, but its simply not what were discussing here are we?

 

[internalaudit]

I don't think it's desperation bu

This Lexus dealer must really hate their corporate overlords because they are selling their cars with 0.9% financing. This is just Canada. If you go to the US, you pay 0%, which I guess is even more desperate.
View attachment 3946

This thread is about the US sales stall about the brand, not about the worldwide sales surge. You can start a separate thread for Lexus Europe. So how does profitability correlate with US sales?

I meant offer really compelling products while at the same time, providing the option of longer financing terms at lower rates.

If something is not compelling enough, nothing will happen to sales even with a -2% 120 month terms.

 

[spwolf]

This Lexus dealer must really hate their corporate overlords because they are selling their cars with 0.9% financing. This is just Canada. If you go to the US, you pay 0%, which I guess is even more desperate.
View attachment 3946

This thread is about the US sales stall about the brand, not about the worldwide sales surge. You can start a separate thread for Lexus Europe. So how does profitability correlate with US sales?

actually you do realize Lexus lease deals are nowhere close to German ones, right? Or Genesis? It is frequent complaint that Lexus monthly payments are too big and they are not competitive when leasing.

All this information is already available - just like you can google Lexus dealers being happiest dealers with profitability, you can also google Toyota profitability in North America:

Toyota’s Strong Performance in North America Fuels Profit

Toyota powered through a car-market slowdown and recorded solid profits in its fiscal third quarter, but it cautioned about uncertainty in China caused by the virus outbreak there.

www.wsj.com

Or let me put it better for you:

Toyota Motor Corporation Announces April-December 2019 Financial Results - Toyota USA Newsroom

Toyota Motor Corporation (TMC) today announces its financial results for the nine-month period ended Dec. 31, 2019. Global Consolidated vehicle sales totaled 6,830,129 units, an increase of 129,227 units compared to the same period last fiscal year. On a consolidated […]

pressroom.toyota.com

• North America: Vehicle sales totaled 2,113,521 units, an increase of 22,263 units. Operating income, excluding the impact of valuation gains/losses from interest rate swaps, increased by 164.8 billion yen ($1.511 billion) to 328.5 billion yen ($3.013 billion).

$3 billion in profit on Toyota/Lexus sales just in North America, for 9 months of 2020 FY.

 

[spwolf]

And I would love to discuss the success that those TOYOTA models have as a result of being prioritized over the so-called "cash-cow" Lexus, but its simply not what were discussing here are we?

If Lexus had its biggest sales year in history and if Toyota had one of the biggest net income years in history, I would call that their strategy is success.

 

[suxeL]

If Lexus had its biggest sales year in history and if Toyota had one of the biggest net income years in history, I would call that their strategy is success.

I guess if TMC is the subject of discussion here or Toyota brand sales in North America we should change the Title of this thread.

With 298,310 total vehicles sold for 2018, Lexus USA has recorded their first year-over-year sales decrease since 2011 (when the vehicle inventory was decimated due to the Tōhoku earthquake and tsunami in Japan).

2019 it went further down a further 0.1%

I dont know about you, but that does not indicate the biggest sales year in history....

 

[LexsCTJill]

I guess if TMC is the subject of discussion here or Toyota brand sales in North America we should change the Title of this thread.

I don't know how anyone can talk Lexus success without taking into account Toyota. This is why Soyfan is so wrong. It is all connected.

 

[spwolf]

I guess if TMC is the subject of discussion here or Toyota brand sales in North America we should change the Title of this thread.

Lexus sales and profitability is included in Toyota North America sales and profitability.

 

[Tragic Bronson]

And I would love to discuss the success that those TOYOTA models have as a result of being prioritized over the so-called "cash-cow" Lexus, but its simply not what were discussing here are we?

Bloomberg just posted this spot-on critique of Lexus' midlife crisis, stalling sales and aging SUVs and crossovers. Author Chester Dawson even reached out to Lexus Enthusiast editor Kevin Watts (Krew) for commentary. I've bolded that passage in my copy-paste of the article below.

Lexus Confronts Midlife Crisis With Aging SUVs Losing to Rivals
By Chester Dawson - Bloomberg
December 30, 2019

“It’s definitely been a slow time for the brand, and that’s what happens when you don’t have product to talk about,” said Kevin Watts, editor of the influential fan blog Lexus Enthusiast.

I had to re-read the original thread and to what Kevin wrote...he didn't talk anything about Toyota, Lexus Intl sales or profitability, he wrote truth.

 

[suxeL]

I don't know how anyone can talk Lexus success without taking into account Toyota. This is why Soyfan is so wrong. It is all connected.

Lexus sales and profitability is included in Toyota North America sales and profitability.

Mods remove if inappropriate, but I couldnt help but think of this for some reason

People say this, and I havent crawled financials yet, but I would be curious to see what this means.

One of the worst parts of spending any time on the street as a research analyst is "profitable" means nothing anymore without additional details, given some of the accounting choices I've seen.

 

[Tragic Bronson]

I don't know how anyone can talk Lexus success without taking into account Toyota. This is why Soyfan is so wrong. It is all connected.

I wish Maurice LaMarche would post on TLE again

 

[LexsCTJill]

View attachment 3948
I wish Maurice LaMarche would post on TLE again

What is the point of your picture?