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The Toyota Motor Story – How Was Lexus Born?
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It was more than a philosophical matter for Toyota Motor because of the money involved. The company, while comfortably in the black, could ill afford to pursue a misguided vanity project. But some argued it stood to lose more from staying out of the luxury market than by jumping in when its most loyal customers – baby boomers – were moving into their peak earning years and would soon be looking to buy more expensive cars. Toyota Motor wanted a high-end product line to prevent these loyal customers from defecting to other brands. The idea was to build a gilded bridge between the compact-car buyers of today and the luxury-car buyers of tomorrow. What’s more, it also needed to safeguard its revenue in an era of increased U.S. import barriers, to stay neck-and-neck with Japanese rivals who were planning their own luxury lines, and to keep its engineers motivated with new challenges.
At home, it sold the stately Century, a boat of a car with a 5.0-liter V-12 engine, used to chauffeur Japanese CEOs and cabinet ministers around the crowded streets of Tokyo. The often empty front passenger seat on this and other Japanese luxury cars was built with a removable cushion so that the back-seat passenger could stretch his legs through to the front seat. But at the equivalent of US$125,000, the car was deemed too expensive to compete in the mass luxury market in the U.S. Besides, Toyota Motor needed to update its export line-up with a car-lover’s car designed primarily to be driven by its owner, not a stately limousine to be driven around in.
Most significantly, Toyota Motor sensed opportunity. Present manufacturers of high end vehicles had risen and gone beyond the needs of the brand new era of car purchasers. Hence, Eiji Toyoda presented the strategy to penetrate towards the high end market. 6 years along with 50 percent of a billion dollars later, the initial Lexus was born. To Toyoda, it was not a matter of cost, only a matter of time. In his words: “For us, this was not only a tremendous challenge and a dream to fulfill but also an inevitable decision.” Yet even the most zealous proponents of a Japanese luxury-car program in the early 1980s could scarcely imagine what Toyota Motor would unleash upon unsuspecting rivals a decade later.
The company’s luxury division, the Lexus brand, has grown from a car enthusiast’s afterthought into the leading luxury brand in the U.S. It usurped Cadillac for that title in 2000 and has kept it ever since. In its debut year in 1989, sales of the untested brand’s two models – the flagship LS and entry-level ES sedans – totaled just 16,302 cars. Two years later it became the best-selling luxury import in the U.S. and had added a third model, the SC coupe. Today, just over two decades since the brand debuted, millions of vehicles sporting the Lexus L are being driven on the roads of America, a testimony not only to the brand’s popularity but also the durability of its cars. Indeed, it is not uncommon to see a vintage 1990 model year LS 400 or ES 300. Today, Lexus has expanded from the first two pioneer models to an industry-leading fleet of nearly a dozen different cars and SUBs, three of which have been added within the past two years.
