Why Did Toyota Launch Lexus?

Lexus has become a byword for reliable, dependable luxury.

Frequently ranked (alongside its ‘big brother’ Toyota) as being one of the most reliable car manufacturers in the world, Lexus has built a loyal following by showing the world that you can have luxury and performance while having a reliable car.

When the Lexus brand launched back in the 1980s, this was a big deal.

European car manufacturers (primarily the big German brands such as BMW and Mercedes-Benz, as well as others like Jaguar) dominated the market for luxury vehicles.

However, as anyone who has owned one will tell you, these older European luxury cars were not the last word in reliability back in their day. While German engineering typically has a sound reputation, by the 1980s the prestige marques had become somewhat arrogant in their operation – realising that even if their cars weren’t as reliable or as well-built as they could be, it didn’t really matter because there was no alternative.

Toyota sensed opportunity, spurred on in part by the initial success that Honda had enjoyed in entering the American luxury vehicle market with Acura and the Legend.

The rest, as they say, is history. The Lexus team got to work developing the LS400, which came to redefine what a luxury car could be (and it remains to this day a desirable modern classic – read our Lexus LS400 buyer’s guide here for more information about this epic car).

This article isn’t meant to be a comprehensive history of the Lexus brand (I’m working on that as a separate piece and also a video topic for the accompanying YouTube channel).

Why Did Toyota Launch Lexus & Not Just Use The Existing Brand?

You might be sitting there wondering why Toyota bothered to come up with a new brand in the first place.

After all, Toyota clearly had the R&D and production capabilities to design, develop and launch the LS400 under its own brand (and, in fact, the LS400 was sold in the Japanese domestic market as the Toyota Celsior).

It sure does seem like a lot of hassle to go through, to develop a whole new brand name and presence just to enter a market where you already have a foothold.

However, the reason why Toyota launched Lexus in the United States back in the late 1980s was a question of perception.

By this point in time, Toyota had a great reputation for building solid, dependable and reliable ‘work horse’ vehicles, particularly pickup trucks.

Owing to import/export laws in both Japan and the United States, Toyota’s best business was done selling pickup trucks – hardly the preserve of Wall Street traders, C-suite management, and the moneyed country club set who were buying BMW and Mercedes-Benz cars.

The perception of a brand is a critical to its success in any given market.

In fact, a huge amount of the ‘added value’ that can be charged for a product (and even the chance of sales success) is tied in to the perception of a brand and its products. This is one of the reasons why companies will pay massive money to celebrities, in order to get their face in a commercial or their endorsement of a product.

For example, Apple is perceived as the premium brand in the technology space, and although Android phones and Windows computers will often eat Apple devices for breakfast in a ‘price to performance’ match up, Apple has the premium brand positioning and perception and this makes their products more desirable and saleable at a relatively higher price.

I’m not going to bore you with the ins and outs of marketing, but suffice it to say that Toyota’s management (and marketing team, including their external marketing agency partner) realised quickly that a luxury car sold under the Toyota brand simply wouldn’t succeed … although the brand had a good reputation for reliable cars, it had no clout in the luxury space.

Therefore, a decision was made to develop a new brand by which to enter the American luxury market, and Lexus was the byproduct of this.

Think about the LS400 vs Toyota Celsior. Although they are the exact same car (barring a few minor differences) which sounds more impressive? Owning a Lexus, or owning a Toyota? I don’t think I need to tell you which!

Recap – Why Did Toyota Develop The Lexus Brand?

In short, Toyota launched Lexus to sell more cars under a prestige brand.

Toyota figured out that to have the best chance of breaking in to the luxury market in the United States, they needed to launch a distinct brand that was free from some of the “not-so-luxury” connotations that Toyota invoked.

In other words, Lexus was a money-making exercise.

At the time of Lexus’ launch in the late 1980s, Toyota had a reputation for building reliable, economical vehicles and pickup trucks/4x4s. Vehicles such as the Corolla were leagues ahead of their European counterparts in terms of reliability (learn more here about the history of the Toyota Corolla).

However, a Toyota wasn’t exactly something that you aspired to own, and changing this kind of brand perception is extremely challenging.

Therefore, Toyota’s management, marketing team, and outsourced marketing talent agreed that the best way forward was to develop a specific luxury export brand … and thus Lexus was born.

You can learn more here about how Lexus came to be (including the origin of the name) on my recent article about what Lexus means. You might also wish to read about just why Toyota and Lexus cars are so reliable compared to the competition.

As mentioned above, I’m also working on a more comprehensive piece on the history of the Lexus brand … so keep an eye out for that.

Feel free to leave a comment below if you have any queries, questions or concerns!

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