European auto sales charts are filled with red ink as economies totter but a rare positive story surrounds Toyota’s premium subsidy Lexus, which will be helped by its newest electric vehicle, the RZ 300e.
Late last year Lexus said it wants to become a 100% electric vehicle brand globally by 2035. Even earlier in Europe, perhaps by 2030 if market conditions allow. Since then EV sales momentum has slowed considerably, but Lexus hasn’t signalled any change of plan.
Americans will be more aware of Lexus than Europeans. Lexus has been a huge success in the U.S. since its inception in 1989, as the brand built a reputation for keen attention to customer service and excellent engineering. Last year Lexus sold 355,600 vehicles in the U.S., but only 69,200 in Europe.
Europeans are said to be more brand-conscious than Americans, and it’s a hard sell in the premium market if you don’t have a BMW, Audi, Mercedes or Porsche nameplate. Other manufacturers too had a tough time moving into the upmarket sector, and much shareholder money has been squandered by the likes of Renault, GM’s Cadillac, Ford Europe, and Nissan’s Infiniti as they sought huge upmarket profit margins. Nissan pulled Infiniti out of Europe in 2020. Honda never even bothered to try and sell its Acura vehicles here. Other pretender brands like Stellantis’s DS, and Hyundai’s Genesis look to be fighting a losing battle.
Lexus sales in Europe (the EU, EFTA and U.K.), in amongst a tidal wave of either negative results or anemic progress, are up nearly 30% at 47,500 in the first eight months of the year, according to the European Automobile Manufacturers Association. Last year sales almost doubled but were still way behind 2019’s pre-Covid high of 90,000.
Lexus has said it wants to raise sales to 100,000 a year but hasn’t said when.
These numbers can’t compare with BMW’s 510,000 (up 10%), Mercedes 430,000 (up 0.5%) and Audi 450,000 (down 8.5%) in the first eight months, but Lexus certainly is winning the momentum race. This must have something in common with the impressive success of parent company Toyota, which increased sales through August by 12.7% to 620,000 compared with the same period last year, largely based on its expertise with hybrids. Other mass car makers barely held on to plus figures. Lexus shares with Toyota a preponderance of hybrids and plug-in hybrids in its lineup.
Jamel Taganza, vice-president of French auto consultancy Inovev, said Lexus is way behind the German competition in the race to electrify. Lexus has two EV ranges, the RZ and UX, while Mercedes has 10, Audi five, and BMW seven.
Taganza said electrification is not a current priority for Toyota or Lexus, but it will be. China is now less important for Toyota as local EV brands have assumed control, Europe is uncertain about EVs, while the U.S. profile is currently low.
“So Toyota (and Lexus) is in a position of a follower, looking at the development of markets but waiting to see how they develop before proposing new products. However, it doesn’t mean that Toyota is doing nothing,” Taganza said in an email.
Matt Schmidt, of Schmidt Automotive Research, said Lexus needs to bolster its EV offering because in the premium sector this can account for almost half of the market.
“The RZ 300e will help Lexus maintain market share in markets that have rapidly transitioned to EVs at a great pace and slightly faster than expected, especially the Nordic markets where Toyota traditionally had a high market share,” Schmidt said.
“If you don’t have an EV in your line-up, you’re neglecting almost 50% of the market on average. The RZ is a good second attempt following the half-baked UXe, which had some charging speeds from yesteryear,” Schmidt said in an email exchange.
The RZ is essentially a higher-trim Toyota BZ4X, according to Schmidt.
“Lexus gives a good barometer of how difficult it is to penetrate the German stranglehold of the European premium market. Lexus has always played the long game – the very long game – of trying to establish some form of brand equity, keeping pricing stable, and going after value rather than volume,” he said.
Benjamin Kibies, Senior Automotive Analyst at Germany’s Dataforce, said Lexus’s determination to stay in Europe is paying off, while it leads Toyota’s EV development.
Toyota has been criticized for lagging behind the electric revolution, but the recent unexpected slowdown in EV sales has left the company looking more far-sighted than laggardly.
“Lexus is the only Japanese premium brand remaining in Europe and so far their will to stay has paid off. They are growing alongside the Toyota brand and currently make up 7.1% of combined Lexus/Toyota sales, compared to 2.9% back in 2004 and 5.6% in 2014,” Kibies said in an email.
“When it comes to EVs, Lexus makes up for 16% of Toyota/Lexus combined sales, thus spearheading the group’s electrification effort. Lexus can also serve as a test lab for the group’s EV innovations,” he said.
Inovev’s Taganza said Toyota is very strong and can develop thermal engines for the rest of the world and improve its European EV lineup.
“At the end of 2023, Toyota announced that they will launch 6 new EVs by 2026 and announced a new electrical architecture from 2026. On this date, the Japanese carmaker expects 20% of its global sales to be 100% electric, or around 2 million vehicles sold in 2026.”
“And we can expect that some of these future models will also have a Lexus badge,” Taganza said.