Lexus to double dealership numbers

LEXUS Australia plans to double the size of its national dealer network to cope with an influx of new products starting this year, but has put on hold its retail expansion program for two years due to the global financial crisis.

The recommencement of the Toyota luxury brand’s ambitious plan to increase the number of its outlets from 23 to 48 will now coincide with the Australian release of the first Lexus small-car in 2011.

As we revealed last week, the front-drive Corolla-based five-door, codenamed C-Premium and due to make its global premiere at the Frankfurt motor show in September, has been confirmed for sale in Australia in 2011, when it should become the Japanese maker’s volume-selling model.

“Audi has moved ahead on the back of product,” Lexus Australia chief executive John Roca told GoAuto last week. “Look at the A3 – that’s where we need to be. We recognised those segments were growing years ago but the problem is it takes years to produce something to compete, which is where (C-premium) will play a big part.

“If you look at the market today, they’re the areas that are growing.”

From top: Lexus RX350, Lexus IS250C, Lexus Australia chief executive John Roca.

Lexus Australia sales were down by one-third year-on-year to June 2009, thanks largely to the changeover of its RX350 luxury SUV, which accounts for half of all sales.

But the company expects a stronger second-half led by another boom month in July, when 250 orders were carried over from June and when the luxury market rebounded to be 20 per cent up. Lexus has presold its first two months’ supply of both the RX450h hybrid and IS250C, both of which arrive from August.

The IS F super-sedan continues to attract a two-month waiting list, with four to five examples sold in Queensland, where the LS and LX are also popular, every month from a nationwide allocation of just eight cars – down from an initial 12.

“This is traditionally the quiet quarter, but June was that good some of that spilled over into July. So as much as we had pull-forward, we also didn’t have the supply and so we had carryover like many of our competitors. July will be good – the interesting one will be August.

“I think what you’ll find is the market will recover in the second half of the year,” said Mr Roca, who admitted that sales became before profits during the same period in 2008.

“Last year we were in run-out mode with the RX, so while the volume was there the profitability wasn’t – we were just running out cars we had too many of because we got caught with supply. Now we have a full and free supply of all RX models, so we expect to do around the 160 mark with RX, which will be consistent with last year in terms of volume in the second half, but profitably will be up in a major way.

“Both the RX and IS volume cars are now on song, so the timing couldn’t be better for us. We’re very fortunate we have the cars to take advantage of an improved second half with new products, and our dealers are crying out for stock,” he said.

Lexus has targeted at least 5500 sales in Australia for this year, which is well down on the 6700 vehicles it sold in 2008 (and further behind its 8200 sales record, set in 2007), and plans on maintaining a 10 per cent share of the luxury market.

“Our plan was 5500 and 10 per cent,” said Mr Roca. “But the market is stronger than that so I think we’ll get close to 6000 this year. We turned the corner in May, when the RX350 came on and we cleared all 2008 stock.

“When you break it up into segments 15 per cent is luxury. Our models are the top two or three (sales) performers in each sub-segment, but we only operate in six of those segments.”

Mr Roca said his company’s retail expansion plans had been postponed until market conditions improved, but that the Lexus dealer network’s refurbishment and rebranding program would continue as planned.

Using the new-look corporate image that debuted in Japan two years ago as a blueprint, the process started in Perth last year and continued with the newest Lexus outlet, a former BMW dealership in Wodonga, which officially opens this month. A new signage package would also be rolled out in the interim.

“Our expansion plans are on hold for another two years because of the market,” said Mr Roca. “There will be no expansion for a couple of years, which makes good business sense because you want the (dealers) to recover from the last 12 months and put them in a position to reinvest.

“Refurbishments will occur in line with new CI in the meantime, and we will put all the plans in place, go through council approvals and all that and be ready.

“Half of the issue for dealers is confidence and that comes from profitability and product. When they see what’s coming, that’s when they expand and start filling up showrooms and then workshops. To invest in a car dealerships costs millions these days,” said Mr Roca.

“My plan is the same amount of (dealership) owners, but more dealerships. So for example in Sydney we have Parramatta, Sutherland, Chatswood and Sydney City, and we’ll expand out to the Brookvales, Castle Hills and Rushcutters Bays in the eastern suburbs and maybe even Wollongong.

“It’s just a matter of time. Blackburn has outgrown itself in three years in Melbourne too. We’ll also look at a few rurals on the way, maybe combined with Toyota dealers.

“The plan is in the next 10 years we’ll probably go to 38 and maybe 40 dealers, but eventually we’d like to get to 48. That’s still a fair way away, but it’s all linked to product,” said Mr Roca.