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Made in Japan - but will Lexus sell there?
By Martin Fackler The New York Times

WEDNESDAY, AUGUST 31, 2005

TOKYO A network of 143 plush new dealerships, gleaming with marble floors and Italian sofas, is ready for business. An army of 2,000 salesmen, mechanics and managers has completed training on how to pamper demanding clients.

Three car models have been redesigned with roomier interiors, brawnier motors and advanced sound and navigation systems. All the preparations were aimed at Tuesday, when Toyota Motor introduced its Lexus brand to a new market: Japan.

It will not need to bring the cars, though - they are already here.

All the models sold in the United States under the Lexus logo have been available in Japan under blander Toyota names. The Toyota versions came with simpler interiors and options and, in some cases, lower prices.

Before it was taken off the market in Japan in December in anticipation of the Lexus introduction, the Lexus GS series of sedans was sold here as the Toyota Aristo. The Lexus IS sedans, which are priced at more than $30,000 - sometimes well above that - in the United States, were sold in Japan as the Toyota Altezza, with a list price around $25,000. The SC430, a two-seat sports car, was called the Toyota Soarer.

Success here will hinge on whether Toyota can create an identity for Lexus and give it the sort of luxury cachet for which consumers are willing to pay a premium. To do this, Toyota must convince Japanese drivers that the cars are more than just Toyotas with new name plates and fatter price tags.

Why it took the company so long to bring Lexus to Japan, a feverishly brand-conscious nation, is a bit of a puzzle. One answer may be that Toyota, the world's most profitable carmaker, has never had trouble selling its cars in this country as Toyotas. Company officials also say the Japanese car market is just now reaching the point where it can sustain a large luxury segment.

"We want to raise the level of our cars," Toyota's president, Katsuaki Watanabe, said last month. "If we make a luxury brand, there will now be a market for it. In this sense, Japan is becoming like the rest of the world."

But delaying Lexus may also have been a mistake, given the success that German producers of luxury cars like Mercedes-Benz and BMW have had here. Toyota, however, is not alone in hanging back from the high-end market. Neither Nissan Motor nor Honda Motor has brought high-end U.S. models to Japan.

Analysts offer another explanation: The Japanese carmakers may have wanted to wait until the luxury brands were established in the United States and other countries before making the huge investment needed to market them in Japan. Toyota has spent more than two years and, by some estimates, almost $2 billion getting ready for this introduction. It refuses to disclose the figures. But despite the resounding success of Lexus in the United States and about 40 other countries, the concept may face its toughest sales job at home.

"Will they displace Mercedes and BMW?" said Kurt Sanger of Macquarie Securities in Tokyo. "The reality is, it may be hard. They're just taking Toyotas and selling them somewhere else."

When Toyota introduced Lexus in the United States 16 years ago, it won over luxury car buyers with sumptuous showrooms, meticulous service and products consistently at the top of quality rankings. So effective were Toyota's efforts to create a distinct identity by using a separate sales network and marketing campaigns that some Americans were unaware that Lexus was made by Toyota, or even that it was Japanese.

Analysts say Lexus will have a much harder time accomplishing that in Japan, where its high-end Toyota models will be sold with their Lexus names, similar options and at about the same prices as in the United States. What is more, the cars have been familiar in Japan as Toyotas, and attentive service is already common in Toyota's Japanese showrooms and those of other carmakers.

Then there is Toyota's enormous presence here - the company dominates Japan's 3.96-million-vehicle market for passenger cars and trucks with a 45 percent share. Analysts say it will be hard for Lexus to set itself apart from such a well-known brand and present itself as something distinct and upper-tier.

One step Toyota has taken to address these problems is a full redesign of the three models that will appear in Lexus showrooms. The IS series will have wider bodies, bigger engines and hard disk drives that can hold maps for the navigation system and 20,000 songs for the sound system. The exterior is to have more aerodynamic styling.

Toyota says it is not trying to challenge Mercedes and BMW, which have dominated Japan's 200,000-vehicle-a-year luxury market. Rather, company officials say, they are looking to position themselves in what they call a gray zone between the German makers and the top of their own current line.

Finding such markets is important for Toyota, whose sales in Japan's saturated market have hit a plateau in the past five years at around 1.75 million a year. Toyota hopes to sell as many as 60,000 Lexuses a year within three years and to eventually raise that to 100,000 a year.

The company says there is an untapped pool of Japanese who want luxury cars but do not feel comfortable buying foreign vehicles. Masanori Suzuki, 28, the president of an aluminum-foil maker in Shizuoka, may be such a customer. Suzuki drives a Toyota Celsior, a high-end sedan sold in the United States as a Lexus GS. Suzuki said he was glad that Lexus was finally coming to Japan. He said that he had wanted to buy a luxury car but that Mercedes and other European brands had gauges, green instrument lights and wood interiors that did not appeal to Japanese tastes.

"My next car will probably be a Lexus," Suzuki said by phone. "But a Lexus is really just a Toyota. There are probably a lot of Japanese who wouldn't want to pay a lot of money for a Toyota."

TOKYO A network of 143 plush new dealerships, gleaming with marble floors and Italian sofas, is ready for business. An army of 2,000 salesmen, mechanics and managers has completed training on how to pamper demanding clients.

Three car models have been redesigned with roomier interiors, brawnier motors and advanced sound and navigation systems. All the preparations were aimed at Tuesday, when Toyota Motor introduced its Lexus brand to a new market: Japan.

It will not need to bring the cars, though - they are already here.

All the models sold in the United States under the Lexus logo have been available in Japan under blander Toyota names. The Toyota versions came with simpler interiors and options and, in some cases, lower prices.

Before it was taken off the market in Japan in December in anticipation of the Lexus introduction, the Lexus GS series of sedans was sold here as the Toyota Aristo. The Lexus IS sedans, which are priced at more than $30,000 - sometimes well above that - in the United States, were sold in Japan as the Toyota Altezza, with a list price around $25,000. The SC430, a two-seat sports car, was called the TOKYO A network of 143 plush new dealerships, gleaming with marble floors and Italian sofas, is ready for business. An army of 2,000 salesmen, mechanics and managers has completed training on how to pamper demanding clients.

Three car models have been redesigned with roomier interiors, brawnier motors and advanced sound and navigation systems. All the preparations were aimed at Tuesday, when Toyota Motor introduced its Lexus brand to a new market: Japan.

It will not need to bring the cars, though - they are already here.

All the models sold in the United States under the Lexus logo have been available in Japan under blander Toyota names. The Toyota versions came with simpler interiors and options and, in some cases, lower prices.

Before it was taken off the market in Japan in December in anticipation of the Lexus introduction, the Lexus GS series of sedans was sold here as the Toyota Aristo. The Lexus IS sedans, which are priced at more than $30,000 - sometimes well above that - in the United States, were sold in Japan as the Toyota Altezza, with a list price around $25,000. The SC430, a two-seat sports car, was called the Toyota Soarer.