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Lexus plans for growth on the back of its hybrid models

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18 Apr 2007 14:47:51
Lexus GB director Steve Settle banks on the grey pound and green technology

Steve Settle, director of Lexus GB, is well versed in the pervasive eastern business culture that steers Toyota and its prestige division in the UK.

It is a philosophy based on the strength of manufacturing in Japan, he said – a “pursuit of perfection” that leads to “continual improvement” in the company's performance.

The basic principles are respect for fellow workers, understanding the root cause of difficulties, perseverance and building consensus before making decisions.

Settle: Lexus is in
Settle: Lexus is in "pursuit of perfection"

“Lexus GB is a company that plans long and acts quick,” said Settle. “We don't get dissenters. Everyone is brought into the decision.”

After growing new sales by almost 40 per cent to 14,700 last year to become the fastest growing premium brand in the UK, Settle said 2008 would be a year of consolidation.

Despite a diesel model, the IS 220d, topping the brand's UK sales last year, Settle said Lexus' future focus remained very much on maintaining its dominant position in the hybrid market.

He took up his current position in 2005 having previously spent seven years with Toyota Europe.

What is the current size of Lexus' dealer network?

Following the opening of Lexus Derby in February we now have 52 sites covering 60 per cent of the UK market.

How much of the network operates separately from Toyota?

The dealerships in Chester, Hatfield, Brighton, Southend, Leicester and Edinburgh, for example, are all standalone with nothing to do with Toyota and 55 per cent of the network has dedicated workshops.

We are moving towards more dedicated Lexus sites and want 75 per cent of the network to be solus by 2010. But we don't want to push dealerships in smaller territories to be over facilitised.

Brighton, Teesside and Southend have all been relocated and we have three more sites to go to bring the entire network up to the latest standards.

Will network numbers increase?

By 2010 we want 60 centres. We want to expand with existing partners if possible.

The brand will have 60 sites by 2010
The brand will have 60 sites by 2010

How much investment in standards do you expect dealers to make?

The average Lexus centre has invested between £2m and £3m. We are very specific about what we have in terms of furniture and ceiling height for example.

Our Centre Stage programme checks the customer gets the Lexus experience. Because we are a small brand our centres help to generate brand awareness.

What is the network's make up?

We have a good mix of plcs such as Lookers, Sytner and Inchcape, regional groups such as Jemca in London and owner-operators like Robert Bennett in Teesside. We don't own any of our sites and it will stay that way.

Which models drove sales growth last year?

The biggest seller was the IS 220d on 4,850 units followed by the IS 250 petrol on 3,460 so there was huge dominance in the D-segment in our range.

Market forces made the 220d successful because it was the newest and cleanest car in the segment and caught the imagination of user-choosers who were sick of the 3 Series.

What's Lexus' long-term vision?

Our big passion is hybrid. There is so much noise in the marketplace about carbon footprints that the order bank has taken off.

Who is most interested in buying Lexus hybrids?

We've taken orders from lots of customers in FTSE 100 companies who want to show they're making an eco statement. Not through having the ultimate eco car but something better than a big petrol car. The Lexus hybrid is fast, smooth and efficient.

How will you take your hybrid line-up forward?

By 2009 we'll have a hybrid version of every model. As well as our traditional high levels of customer satisfaction, our hybrid strength is what differentiates the brand.

Is there a contradiction in producing hybrid models alongside higher consumption performance petrol cars to compete with BMW's M Series and Mercedes' AMG?

We're doing it because we can. It's about engineering expertise and trying to make the best cars in the world. It doesn't detract from our differentiation into hybrid but shows we can make stunning performance cars as well. The ISF will be launched in 2008. These products fire up the dealer network.

Will the ISF detract from Lexus' green credentials in the UK?

No – we'll only sell 150 ISFs a year but we need to give the public a choice. Today we sell more petrol versions of the LS than hybrids but in 2008 we'll sell more hybrids.

We already sell more hybrid RXs than petrol and this year we'll sell more hybrid GSs than petrol. Within three years we'll give a hybrid option on the whole range before Mercedes is even in the market.

What is the sales forecast for 2007 and beyond?

Last year was a step change year during which we took on 25 more sales staff in the network. The objective this year is to grow sales slightly to 15,300 units. As hybrid becomes more mainstream we will have further opportunities to grow.

The momentum is building and hybrid is the tool for long-term growth. It means we won't be competing directly with BMW, Mercedes and Audi because we'll be leading the way. Others will follow because the government will drive the market towards hybrids.

Hybrids will lead Lexus sales in the future
Hybrids will lead Lexus sales in the future

Are you concerned that Lexus slipped back in the RMIF National Franchised Dealers' Association's Dealer Attitude Survey?

The survey asks: “Will the franchise be more profitable in 12 months time?” That is the key question and we came top. Profitable networks deliver customer satisfaction.

Does Lexus appeal to young or older buyers?

The grey pound is helpful to us. The demographic of older people with money helps premium brands but the IS has lowered the age of our customers.

Would you consider Nissan's introduction of the Infiniti brand to the UK as a threat to Lexus?

It's not an immediate threat. We're 17 years old and it takes a long time to establish a brand. Awareness comes from having cars on the road. You've got to convince the network to take the product.

The premium market in the UK already accounts for 20 per cent of the total so it will be difficult to establish another brand. How many customers would move from Lexus to Infiniti having already moved from a prestige German brand?

So which are your main rivals?

Mercedes, BMW and Audi are the competition. They have had breakthrough products and we now have hybrids. But Lexus is leftfield – we'll never sell the same volumes as them.

Fact Box

Age: 50
First Job: Technical correspondent with Fiat UK
First car: Mini
Favourite newspaper: Times and Financial Times
Favourite book: Brave New World by Aldous Huxley
Favourite pop group: The Eagles

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