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Lexus man: A.J. D’Amato on the construction site that will cost around $60 million for land and building. It is across Jamboree Road from Fletcher Jones in Newport Beach.

Eugene Garcia, The Orange County Register


Luxury battle looming

Most expensive U.S. car dealership faces world's largest Mercedes dealership.

The Orange County Register

NEWPORT BEACH – A $65 million new Lexus dealership, believed to be the most expensive car dealership in U.S. history, is under construction down the street from Fletcher Jones Motorcars, the nation's largest dealer of Mercedes-Benz.

It might look like car wars, but a looming battle between the two luxury dealers will be waged in a style fitting their marquis brands. General Motors and Ford may lure customers by slashing prices, but Lexus and Mercedes are drawing clients to the corner of Jamboree Road and MacArthur Boulevard by offering premier service.

"When you pull in, we want you to feel like you're at a five-star hotel," said A.J. D'Amato, co-owner of the Newport Lexus, which is on track to open in mid-2006.

Visitors to Fletcher Jones now pull up in lines where uniformed valets take their keys. At Newport Lexus, a "service concierge" will greet and direct arrivals to the proper department.

The Lexus lounge will feature a Wolfgang Puck Café in response to Fletcher Jones's Starbucks, where regular coffee is free, but clients must pay for cappuccinos or espressos.

The Mercedes customers can now amuse themselves on a four-hole putting green. Parents can park their kids in a playroom equipped with a TV for videogames. Call in advance and a childcare worker will be there too. Clients can get their shoes shined or their nails manicured.

For entertainment, "guests" at the new Lexus dealership will be able to watch one of two dozen plasma-screen TVs. Or they can curl up on a leather sofa warmed by a year-round crackling fireplace. An in-house boutique will "be like Tommy Bahama meets St. John Knits," D'Amato said.

There is talk of a hair salon and day spa offering massages and facials, although D'Amato said, "My wife thinks that's going too far."

For "guests" in a hurry, D'Amato promises to provide a free loan car within 10 minutes of their arrival. Both dealers will provide "preferred" clients - people who buy cars there - free car washes, free shuttle rides to John Wayne Airport and free parking while you're away.

Garth Blumenthal, general manager of Fletcher Jones, said he welcomes Lexus to the neighborhood. The ultimate winner will be the consumer.

"Both dealerships will have to try harder," he said.

The corner of Jamboree and MacArthur is not the only place in Orange County where luxury dealers offer luxurious amenities. In Santa Ana, Crevier BMW has a Diedrich Coffee shop, free loaners and shuttles to John Wayne. Already the nation's No. 1 BMW dealer in total revenues, Crevier is building a new $31.5 million showroom at its dealership in the Santa Ana Auto Mall, scheduled to open in 2007, where guests will entertain themselves with iPod stations and individual televisions at every seat. A Rudy's Barbershop will offer haircuts.

"We feel service separates us from the competition," said Rob McGee, Crevier's director of marketing and technology.

When it comes to location, Crevier cannot compete with the neighborhood where Newport Lexus will face Fletcher Jones, a straight shot down the San Joaquin Hills (73) Toll Road from ZIP code 92657, aka Newport Coast, which topped Orange County with an average household income of $290,000, according to 2002 tax returns, the most recent available.

"It's an outstanding location to sell cars," said George Peterson, president of Auto Pacific, a Tustin auto industry market analyst. "It puts Lexus in the heart of Orange County's luxury car market."

Mercedes typically gets more per vehicle. Data collected by Wards Automotive show Fletcher Jones fetched an average $60,132 per new car sold in 2004 compared to $42,423 per new vehicle at Tustin Lexus, which is owned by the same company as the new Newport Lexus.

D'Amato aims to sell 5,000 vehicles in the first year at Newport Lexus, which will hold 1,200 cars and SUVs on site.

The new location could help Lexus catch up with Mercedes in Orange County. In the first three quarters of 2005, data on Orange County compiled by R.L. Polk & Co. reported new registration of 6,638 Lexus cars and SUVs compared to 7,817 Mercedes cars and SUVs.

It's uncertain whether Lexus, which stakes its reputation on reliability, can bring in as much revenue on service. Instead, the Japanese carmaker is counting on good service to build customer loyalty.

"Everyone fixates on sales, but most of your interaction is going to be during service, especially while a car is under warranty, which can last for years," said Charlie Vogelheim of J.D. Power & Associates, the auto rating company. "A putting green isn't going to make or break a store. But it's something that's going to interest you."

Premium service benefits Fletcher Jones' bottom line in many ways. In 1994, the dealer earned 15 percent of its $496 million in revenue from its service, body shop, parts and accessories, such as sales of Mercedes clothing and sunglasses, according to Wards data. Among the nation's 100 largest dealers, the average was 12 percent.

Service is the main reason Ben Bazargani, an Irvine real estate developer, said he has bought nine Mercedes over the years from Fletcher Jones.

"Everything is exceptional," said Bazargani, 65, who enjoyed a coffee and shoeshine while his 2006 CLK 320 was being washed Friday morning. "It's a pleasant atmosphere. I meet friends and get a look at new models."

Blumenthal said Fletcher Jones is preparing to launch a special upper tier of service for customers who have bought 10 or more cars at the dealer, which opened in 1991.

"It's not enough just to sell Mercedes-Benz," Blumenthal said. "You have to brand your company and differentiate yourself from the competition."

Profiles in service and sales
Dealer Fletcher Jones Motorcars Newport Lexus
Food Starbucks coffee shop Wolfgang Puck café
Atmosphere Putting green Fountains and fireplaces
Personal services Shoe shines

and manicures

Possible day spa, facials and chair massages


Free loan vehicles during service. Free shuttles to John Wayne Airport. Free car washes Monday through Saturday. Drop-off car for service and pick up free loaner within 10 minutes. Free airport shuttle. Free car washes during service.
Sales More than 6,000 new vehicles, average $60,000. 2004 revenues $496 million. About 5,000 new vehicles, average $42,000. Goal for 2006 is $300 million in revenues.
Ranking No. 1 Mercedes dealer in the U.S. No. 2 in revenues of all U.S. dealers. Goal is to be No. 3 U.S. Lexus dealer and among top 10 U.S. dealers.
Sedan 2006 S-Class $77,250 2006 LS 430 $56,525
Convertible coupe 2006 CLK-Class $62,300 2006 SC 430 $66,355
SUV 2006 M-Class $39,750 2006 RX 330
Sources: Wards Automotive, for manufacturers' suggested retail prices

Contact the writer: (714) 796-7969 or

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