Japanese Luxury Car Brands in Crisis

      October 28, 2013 08:20

      Japanese luxury carmakers, which took the global market by storm starting in the late 1980s and threatened to topple the mighty German brands, have fallen on hard times.

      Just before the global financial crisis in 2008, Lexus sold 520,000 cars worldwide, around half of Mercedes-Benz and Audi, but last year BMW, Mercedes-Benz and Audi accounted for 70 percent of global luxury car sales while Toyota's Lexus, Honda's Acura and Nissan's Infiniti took up just 10 percent.

      In the beginning, Japanese luxury models flaunted splendid fuel efficiency and environmentally friendly technology, while their superb attention to quality and after-sales service lured ever more customers to their showrooms. But the automakers failed to keep up with their German rivals in automotive technology and analysts say this gap will only widen further.

      Sales of the Acura, which totaled 230,000 units in North America in 2005, plummeted to around 156,000 units last year. Lexus, which upgraded the designs of all models, has yet to see sales return to levels prior to the financial crisis.

      Nissan, which did not provide separate sales results for the Infiniti brand, is estimated to have sold only 170,000 last year, which is no significant improvement.

      Meanwhile German luxury carmakers are setting new records every year. In 2010, BMW, Mercedes-Benz and Audi all saw sales surpass one million units. And last year, BMW's sales rose to 1.54 million units, putting it among mass-market brands in terms of volume.

      Audi's sales last year were 50.9 percent higher than in 2007, putting it ahead of Mercedes-Benz in second place in global luxury car sales. Mercedes hopes to regain the No. 1 spot in 2020.

      Analysts say the demise of the Lexus paints a vivid picture of the present landscape of the global automobile market.

      "German luxury carmakers earned their reputation through a long history of excellence, but Japanese luxury carmakers just decided one day to start making high-end vehicles," said Shin Jung-kwan at KB Investment and Securities. "They had to convince consumers with superior technology and quality, and they fell short."

      Some also say the Lexus, Acura and Infiniti failed to move quickly to build more cars overseas and offer a wider range of vehicles. They have sold more than half of their cars in the U.S. but have yet to set up production facilities there. Lexus is only now planning to produce its ES model in the U.S. staring in 2015.

      By contrast, Mercedes-Benz and BMW made plans in the early 1990s to set up factories in the U.S. and began rolling out SUVs there in the mid-1990s. BMW's U.S. plants now produce 94 percent of its cars sold there.

      Japanese luxury carmakers were also slow to catch on to the growing preference for fuel efficiency and practicability among consumers amid the prolonged global recession. As of 2011, one in four BMWs and Audis were compacts but Lexus had only one model in that class, and there is no compact Infiniti.

      German carmakers are developing more compact models with 2.0 liter or smaller engines, such as the Mercedes-Benz A and B Class, BMW 1 Series and Audi’s A1 and A3.

      In Korea, Hyundai-Kia Automotive Group decided against developing an independent luxury brand when they saw Japanese firms struggle and are instead diversifying the range of the Equus and Genesis premium models.

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