Toyota: Back in Business, as Lexus Fends Off Rivals

Toyota's robust financial report today sends a message to all rivals, foreign and domestic, that the company intends to compete vigorously once again for worldwide dominance.

The company now expects its profit for the current fiscal year, which ends in March, to more than double to 760 billion yen, boosted by new models and growth particularly in the U.S. market.

Toyota's reasons for optimism include strong reception for its new 2013 Camry, launched last fall, as well as robust demand for its Prius family of hybrids, which include versions smaller and larger than the original that have been launched recently. Prius models now outsell every other Toyota nameplate but Camry, including the previous No. 2 model, the Corolla compact.

"We were the No. 1 retail brand in the U.S. for the second consecutive month" in May, Bob Carter, Toyota's U.S. general manager, said last week. "And we see most of our share growth coming from conquest sales."

The automaker still faces tough challenges, including increased competition for Camry from the new Ford Fusion and Chevrolet Malibu. There's also the matter of how Lexus's recovery has been lagging that of the Toyota brand. Lexus sales were flat for the first five months of this year compared with Toyota brand's 12-perceent gain over 2011.

Longer term, Toyota executives believe they must enhance the Lexus brand overall to keep up with stiffer global competition. For one thing, Lexus has embarked on a new dealership-training program of product and delivery specialists who can coddle new-car buyers and answer their tech questions like the denizens of an Apple Genius Bar. Also, the company would like to stretch out its brand architecture to put more distance between Toyota and Lexus.

"To conquer BMW and Mercedes drivers, we can't just be looked at as an upgraded version of Toyota," Kiyotaka Ise, global head of the Lexus brand, told Bloomberg in Tokyo. "We want our brand to be chosen for its character and handling." Changes will include regarding Lexus as a unified global brand while Toyota continues to take a more regional approach.

Many American consumers are fond of the Lexus brand, as other luxury automakers are competing for their loyalty. The newly revamped GS sedan (below) will test whether Lexus can do a better job of warding off the competition.

Lexus brand strategists aren't sitting idle. To promote the revamped GS series, Lexus told Bloomberg that Sports Illustrated swimsuit model Tori Praver "helped to inspire a track challenged by American car-racing ace Scott Pruett, while armchair drivers keen to join in the action can get the Tori 500 app for the iPhone and iPad. The publicity helped Lexus sell more than 4,900 GS cars in the U.S. within two months of its introduction, exceeding sales for all of 2011."

As Bloomberg adds, "Toyota is stressing bolder style and what it calls 'emotional designs' under a companywide revamp to foster creativity, streamline decision- making and get cars faster to market. The success of the Lexus strategy will signal whether Toyota can revive sales growth marred by output disruptions from natural disasters, a stronger yen and laggard introductions of new cars."