BrandIndex in Automotive News about Toyota effect on Lexus brand

Toyota troubles tarnish Lexus, too

Research shows image takes a hit

Automotive News -- March 15, 2010 - 12:01 am ET

LOS ANGELES -- The recall scandal that has devastated Toyota also has diminished Lexus' standing with consumers.

Market researchers say the luxury brand has been hurt since the crisis escalated in the past two months, though not as much as Toyota.

BrandIndex Service in New York, which surveys consumer brand perceptions, says Lexus' quality reputation has tumbled to its lowest rating ever. And data from show that purchase intent -- defined as a shopper's configuring a vehicle online, plus other factors -- is down, too.

"Lexus spent 2009 either neck and neck or slightly ahead of luxury rival BMW in quality scores," said Drew Kerr, a BrandIndex spokesman. "The game changed in early February, when the Toyota news exploded and Lexus began descending significantly."

Toyota has recalled more than 6 million vehicles in the United States, mainly to fix problems related to unintended acceleration. About 450,000 have been Lexus vehicles. The ES 350 and the IS 250 and 350 were recalled last fall to fix pedals and floormats. This year the new HS hybrid was recalled to install new software for braking.

Unlike Toyota, which has seen U.S. sales plunge, Lexus is up 5 percent so far this year. But that is due in large part to the addition of the HS and the redesigned GX SUV.

Luxury rivals are doing much better: Mercedes is up 24 percent, and BMW is up 12 percent. Lexus has been the luxury sales leader since 2000, but both Mercedes and BMW outsold Lexus in February.

"Given all the challenges we've faced, we're pleased that our dealers sold more cars this February than last," said Lexus Division chief Mark Templin during a monthly sales call. "That keeps us on pace with our plan for moderate growth this year."

BrandIndex asks respondents whether a brand has high or low quality. A score of 0 reflects an even split in the answers. Lexus' score was 30 on March 8, down from 45 on Jan. 1 and 48 in early February. By comparison, Toyota's score had plunged to minus 5 on March 8.

"Toyota is never mentioned in any of Lexus marketing, as if there's no connection," Kerr says. "But apparently consumers have put two and two together. Both BMW and Mercedes have taken a wide lead in the luxury category."

BrandIndex says BMW's quality score was 44 on March 8; Mercedes had a score of 40.

Edmunds' data show purchase intent for Lexus has slid from a high of 4 percent on Jan. 30 to 2.9 on March 9.

George Kang, senior analyst at Edmunds, says some of Lexus' decline is the result of problems at the parent company. But he says purchase intent also has dropped for BMW and Mercedes, though not as much as Lexus.

BMW went from 3.6 percent at the start of the year to 3.4 percent on March 9. Mercedes slipped from 2.3 percent to 2.2 percent.

"Overall, the luxury segment took a hit," Kang said. "Toyota's purchase intent is starting to rebound because it is a resilient brand. Lexus will recover as well."

Lexus dealers say they are not deterred.

Perry Watson, owner of Lexus of Mishawaka in Indiana, says: "We're not experiencing the kind of anxiety at Lexus as you hear about Toyota in the media. We have a great reservoir of good will with our customers."

He says sales are not where he wants them to be but are picking up.

"The only issue we have is we don't know what effect this will have on the public who don't currently own a Lexus," Watson says.

He says that about one third of his customers are first-time buyers, about the same percentage as before the recalls.

"So for us, nothing has changed yet," Watson says. "We're cautiously optimistic. The manufacturer is giving us everything we need. Our customers are not panicked."