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How to sell hybrids? Learn from Lexus

 

The latest launch of the new generation of the Lexus ES series is impressive for three reasons. First, its threshold price was brought down to ¥359,000 ($56,000) from ¥390,000 for the previous generation, despite upgrades to technology, configuration and interior space of the vehicles.

Second, the new generation of the ES series is distinguished from the Camry, and its wheelbase is 45 mm longer than that of the latter. The platform of the latest ES cars will be the foundation of Toyota’s next generation executive saloon Avalon.

Third, Toyota has raised the threshold sales volume of the Lexus brand from 30,000 units to 100,000 units before localized production in China.

Of all the new ES models, the ES 300h had the most attractive launch, and ushers in the era of the Lexus hybrids, also signaling Lexus has begun to preempt China’s hybrid vehicle market.

The ES 300h comes with a starting price of only ¥399,000, the same as the previous ES 240. It will enjoy a battery warranty of 10 years or 250,000 km, a special treatment only for Chinese clients.

The combined sales of the Lexus hybrids including LS 600h, GS 450h, RX 450h and CT 200h have already exceeded 8,000 units in China in the first half of 2012, accounting for 24 percent of the Lexus brand. It shows that hybrids are no longer just an environmental slogan. They have become the mainstream for the Lexus breed. In the high-end hybrid product segment, Lexus has taken up an 80 percent market share. In 2012 alone, Lexus is likely to sell 20,000 hybrids and the launch of the ES 300h will likely bring that number up to 25,000. Lexus has, without any preferential incentives, cracked the hybrid market all by itself.

But this begs the question: why has the Toyota Prius, which has already been localized in China with a fair price, not sold as well as the Lexus hybrids?

One reason is that high-end consumers are more likely to try new technology. And the other reason, which is more important, is that the Lexus hybrids more resemble the big displacement cars often favored by Chinese consumers.

The second reason has subverted the deep-rooted line of thinking that hybrids are more expensive, thus needing subsidies in order to sell.

The ES 300h, for example, has a 2.5L engine but its 300h sign gives it the impression of having a 3.0L one. And the threshold price of the ES 300h is the same as the non-hybrid ES 250, but the ES 300h is more powerful and fuel efficient than the ES 250. Add to that a longer battery warranty, and the ES 300h is no doubt a choice of value.

Other Lexus hybrids, LS 600h, GS 450h, RX 450h and CT 200h, have all deployed the same method trailer labels, but their displacements are equivalent to gasoline versions.

However, Camry’s hybrid, with a trailer label of 2.5 HG, is not much different than the traditional Camry 2.5G, though the 2.5 HG performs higher than the 2.5G. What’s more, the former is priced higher than the latter by ¥40,000. That might explain why Camry’s hybrid sales have not been encouraging. If it can follow the Lexus method, its sales will likely perform better, with a starting price of ¥258,900.

The success of the Lexus hybrids teaches us a lesson: sell hybrid vehicles like traditional ones and do not make them look alternative and non-mainstream. Lexus has set an example for its competitors in pricing, marketing, service and technology in the hybrid sector. 

(Rewritten by Ray Jing based on author’s article on his blog on sohu.com)

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