Industry Report: Lexus Undaunted by Lackluster European Sales

On the positive, those that have purchased Lexus vehicles give the brand high owner satisfaction marks. While a solid footing to

European luxury brands will enjoy a few more years of unrivaled success before Lexus gives them a real run for their money. (Photo: Shawn Pisio, Canadian Auto Press)

build upon most industry experts believe traditional European luxury brands will enjoy a few more years of unrivaled success before Lexus gives them a real run for their money. If the Germans, in particular Mercedes-Benz and Audi, can close the quality gap while enhancing customer service, they stand a good chance of maintaining the lion's share of the luxury segment even if Lexus cars offer more passion in design and driving dynamics.

That said, news of new diesel and hybrid models, and even more threatening, new diesel-hybrid powertrains, could mean the Europeans will face difficulty in future years. Barring any major advancement making Europe's hydrogen highway a reality, and nothing substantive is expected for decades, Toyota's leadership in hybrid powertrains could seriously challenge the likes of BMW and Mercedes-Benz, which have relied on sophisticated, direct-injection common-rail turbodiesel technology to remain the luxury leaders. Combining

Toyota's leadership in hybrid powertrains could seriously challenge the likes of BMW and Mercedes-Benz. (Photo: Lexus)

such high-tech and efficient diesel engines with Toyota's latest Hybrid Synergy Drive system, as applied to the upcoming Lexus RX 400h, would give Lexus the fuel economy and performance edge over its European rivals.

For these reasons Toyota sees Europe as a growth opportunity for its Lexus division, rather than a thorn in its side. And if it does well there, its home market in Japan, just being introduced to the Lexus brand, should follow suit. Japan has had a love affair with German brands for decades, and therefore success for Lexus is not necessarily a given. Still, the automaker is targeting as many as 60,000 Lexus models sold in Japan by 2006 through 180 dealerships. Toyota is also planning to open Lexus dealerships in China in 2005.