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Lexus Increasing Dependence On Hybrids

But luxury maker struggling with flaws HS250h.

by on Dec.09, 2010

Lexus is betting heavily on hybrids, like the CT200h, despite some setbacks.

As it races to the wire, Lexus is once again aiming to end the year as the nation’s leading luxury nameplate – and its heavy dependence on hybrid-electric technology is one reason it would get there.

The first high-line brand to introduce a hybrid-electric vehicle, Lexus now has more HEVs in its line-up than any other luxury brand – and the list is about to grow, with the launch of the new CT200h. (Click Here for a review of the 2011 Lexus CT200h.)

But not all of the Toyota subsidiary’s hybrids have performed equally well.  Insiders lament the lackluster performance of the first dedicated Lexus model, the HS250h, while the LS600h, the most expensive model in the Lexus line-up – other than the limited-edition LF-A supercar – has been lagging initial expectations.

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Nonetheless, Lexus manager Brian Bolain says the trendline is moving in the right direction, and that hybrid sales are expected to surge from around 30,000 to 42,000 with the addition of the 2011 CT200h.  Measured in terms of share, the technology accounts for about 13% of the brand’s overall volume, with Lexus aiming to boost that to at least 18%.

“We’re looking at the CT200h being a game-changing opportunity for us,” said Bolain, during a recent preview of the new hybrid.

The 2010 Lexus HS250h "hasn't hit our expectations."

While the new model is actually aiming for relatively modest volumes, most likely under 20,000 a year, Lexus is betting the CT200h can appeal to a wide mix of customers that don’t normally put Lexus on their shopping list, including younger, increasingly affluent first-time luxury buyers.  Initial research, he added, shows that those interested in the CT are also more likely to enter the market in the next 12 to 24 months.

To appeal to this buyer, Lexus is borrowing some ideas from the down-market Scion brand, with a bigger push into social media and other online marketing efforts.  That includes the new DarkSideofGreen website and the “Green Issue Debates” series.  Those interested in the CT200h will even be able to schedule test drives directly online.

And, as with the various Scion models, Lexus will offer minimal variants of the new hybrid – just a single grade with a select group of option packages.

The push into hybrid technology reflects some critical trends in the upscale automotive market, according to Bolain.  Gen-X and Millennial buyers “are adopting luxury at a rate that surpasses any previous generation,” he pointed out.

But these new buyers also tend to be much more interested in green automotive technologies, industry studies show.

Of course, that alone, isn’t enough to assure the success of a hybrid offering.  The $110,000 Lexus LS600h has proven a bit lackluster, and industry analysts suggest that may be due to the difficulty justifying the price tag, at least from a green perspective.  The top-line model simply doesn’t deliver the sort of mileage consumers normally associate with hybrid technology.  In fact, the all-new, aluminum-bodied Audi A8 out-performs the LS600h, in terms of fuel-efficiency, with a conventional V8 powertrain.

But the real disappointment has been the HS250h, a quirkily-styled compact hybrid that, under the skin, is nearly identical to the best-selling Toyota Prius.  Despite that similarity, the HS simply hasn’t scored well with reviewers, nor with potential customers. (Click Here for TheDetroitBureau.com’s review of the Lexus HS250h.)

November sales were a sluggish 788, down 46% from year-early volumes.  And it is trending at barely 750 a month, according to Lexus data, which raises questions about its long-term viability.

“The HS has been an interesting experiment,” said Bolain before putting things more bluntly.  “It just hasn’t hit our expectations.”

Then there’s the RX400h, the hybrid version of the luxury market’s top-selling midsize crossover.  Lexus expects it to account for about 18,000 sales this year, or roughly 20% of the overall RX line.

With that sort of demand, Lexus remains convinced that hybrids have a place in the luxury market.  And while the HS250h may be a rare failure, the maker is betting the new CT200h will more than buoy its ongoing interest in green powertrain technology.

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