Adding what is essentially a powertrain option to a plant is a less risky bet for the conservative company, which is reeling from huge losses.
Lexus confirms that the hybrid version of its best selling RX350, the RX450h, will enter production this fall at Toyota Motor Manufacturing Canada (TMMC), which also builds the Corolla and Matrix models.
This decision, from the division of Toyota that leads the U.S. luxury vehicle sales race, is in stark contrast to one that suspended work earlier this year on a U.S. plant in Alabama for the lower-priced Toyota Prius. Prius is of course the unchallenged global hybrid champion. But it saw sales plummet in parallel with declining gasoline prices in 2009. A new 2010 Prius has just gone on sale, but the U.S. plant is still in limbo as Toyota officials debate its future.
Toyota’s record losses of $4.4 billion in 2008, and a staggering loss of $7.7 billion in the first quarter of 2009 have shaken management, which is traditionally risk adverse. So adding what is essentially a powertrain option to an existing manufacturing plant costs hundreds of millions of dollars less than the more substantial tooling costs for a dedicated hybrid plant. It is also a less risky sales bet. If buyers do not appear, the Canadian plant can simply change its build mix to conventionally powered RXs, still the best sellers in the line.
The 2010 RX 450h introduces an updated version of Lexus Hybrid Drive, with a 3.5-liter V6 Atkinson-cycle engine, lighter electric motors, a smaller and lighter power-control unit and other fuel-saving touches. It offers performance similar to small V8s, with an EPA-estimated 32 mpg city and 28 mpg highway (30 mpg combined) for the front-drive version. This is about 16-20% better economy than its RX400h predecessor.
The Lexus RX series demolished the commonly held assertion at U.S. car companies that a sport utility vehicle had to be built from a truck chassis. Not only did the passenger-car derived RX300 catapult Lexus to the number one sales spot in the U.S. luxury segment where it still resides, but it ended the reign of body-on-frame, rear-drive trucks as the basis for luxury vehicles. More than one million RXs have been sold worldwide.
The second-generation RX330, debuted in 2005 with an optional gasoline-electric powertrain — making it the world’s first luxury hybrid. Together, the two versions nudged U.S. RX sales to an all-time record of more than 100,000 in 2007, with the division selling 329,177 vehicles in total. Last year RX sales plummeted to 80,000, but Lexus retained its U.S. luxury sales lead with 260,087 vehicles sold in 2008, although it was down 21.2% from 2007.
"More than 60% of entry luxury sedan buyers said they would consider hybrids."
Mark Templin, group vice president and general manager of Lexus, told TheDetroitBureau.com at a regional news conference that Lexus is currently projecting 2009 U.S. sales of about 200,000 units for its line of cars, crossover vehicles and SUVs, which range in price from $32,000 to almost $110,000. The RX will account for about 80,000 units.
The new 2010 Lexus HS250h, which goes on sale in August, is also the brand’s first hybrid-powertrain only model. “More than 60% of entry luxury sedan buyers said they would consider hybrids, and this is a segment nobody is in right now,” said Templin.
Being alone in a segment is not a good thing in my opinion, unless you have the marketing muscle to garner enough consideration among potential buyers, who do not know they are potential buyers. Then you have to convert the consideration to sales in large enough quantities to meet your sales goals, something Lexus marketing has been having trouble doing for the last two years. When the HS250h was in planning several years ago, Templin said the projected volumes were higher. The automotve world has changed since then.
HS is being offered with only a battery-electric powertrain, and is built in a recently opened plant in Kyushu, Japan along with other hybrid models.
Unlike the RX400h, LS600h and GS450h, which are all powertrain options, the new HS is being offered with only a battery-electric powertrain, and is built in Kyushu, Japan along with other hybrid models. As such it carries a much greater business risk, but Templin says he is confident that he can sell 25,000 in the U.S. on an annual basis for the as yet un-priced hybrid. All told Lexus has sold 170,000 hybrids here since 2005, making it the unchallenged luxury hybrid sales leader. And it has introduced a new hybrid every year since then while German and domestic manufacturers have largely introduced press releases announcing their intention to build them.
Pricing is still being studied, and it is now complicated by Toyota’s aggressive response to the Honda Insight, which saw it cutting prices by 10% on the 2010 Prius. The Prius will be offered with five levels of equipment combinations, designated I through V, ranging from $21,750 up to $34,250, when optional packages are included. Versions II through V are just on sale here but are leading the sales race in Japan. The price leader has yet to appear.
The HS is rated ay35 mpg City, 34 Highway, a reasonable, though not exceptional level of fuel economy. It is longer and wider that the Prius, so I am guessing that it will have a base price in the low $30,000 range.
The Canadian built RX400h, $43,000 for the front-drive version, shares nothing in common with the Prius or HS, except all have Toyota’s sixth generation of hybrid technology underpinning their engineering. The Lexus RS450h and the new HS250h also employ sixth gen technology, which as it has evolved for more than ten years and gives Toyota a clear marketing and technological advantage. However, it is no longer clear that the reputation and engineering can command a premium in the marketplace.