Lexus is the luxury car division of Japanese automaker Toyota. The foundations for the Lexus brand were laid in 1983 at a secret meeting of Toyota executives. At the meeting, Toyota’s then chairman Eiji Toyoda posed the question: ‘‘Can we create a luxury vehicle to challenge the world’s best?’’ Following the meeting, Toyota started a top-secret project, codenamed F1, which eventually led to the development of the Lexus LS 400. The LS 400 was revealed to the public in January 1989 at the Detroit Auto Show and debuted in the United States in September 1989. The LS 400 was widely praised in the automotive press for its silence, build quality, engine performance, high quality, and fuel economy. Lexus soon introduced other models including the RX 400h, the world’s first hybrid luxury SUV. By 2007, Lexus’s annual sales in the United States had risen to 329,177 units. For seven years in a row, Lexus has been the number one selling luxury brand in the world’s largest automotive market.
In Europe, however, Lexus is struggling. Vehicle sales in 2007 were only 54,000 units in the region, less than one fifth of Lexus’s U.S. sales volume. While Lexus fared well in the United Kingdom, sales in Germany, the home turf of BMW and Mercedes, have been dismal. One reason for the marque’s poor reception in Europe could have been the design. According to Karl Schlicht, the brand’s vice-president for Europe: ‘‘To Europeans, it looked very American—boxy and not enough style, not enough design, not enough features.’’ Lexus also offered only one diesel model, in spite of Europeans’ liking for diesel cars. In 2007, Lexus changed the look of its cars in the hope of spurring sales. To differentiate from other luxury carmakers, Lexus decided to offer hybrid alternatives of several of its cars. It also announced plans to revamp its dealership network. Lexus is targeting 65,000 sales in Europe by 2010, still far below U.S. sales.
However, a new competitor is on the horizon: Infiniti. Infiniti, Nissan’s luxury brand, prepared a Europe-wide launch for 2008. The launch pad is Russia—a ‘‘comparatively easy market’’—where its cars were already available through greymarket imports. Nissan aims to sign up about fifteen business partners for dealerships and will replicate its U.S. retail environment, which it likens to a modern design hotel. Initially, it will only launch models with petrol engines. A diesel option will be added by 2010. An Infiniti spokesman noted, ‘‘The European market is the toughest in the world. We’re going for a different angle: performance and fun to drive.’’

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1. Why did Lexus fail miserably in Europe?

2. Is there still hope for Lexus to recover in Europe? Are the changes announced for 2007 enough or is more drastic action needed?

3. Will Nissan’s Infiniti luxury brand be more successful? Why or why not?

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