Lexus, which is the only luxury Japanese car-brand to be operating in India has chosen to focus on self-charging hybrid electric vehicles, because of infrastructure availability, charging infrastructure and capability of people to charge these vehicles.
"We are looking to double the number of cities we are in by the end of the year," says Naveen Soni, president, Lexus India.
Question: Your cars start at around ₹60 lakhs and go up to around ₹2.8 crore - some may argue that you're swimming in German luxury territory?
Soni: When we do the pricing of the product, it's market based pricing. It's not based on how the sourcing of the parts and components or the vehicle itself is happening. Pricing is always coming from the market. This is a basic fact that we've learned both from Toyota and now from Lexus, that you do not have any control over the pricing, because the market defines the price, you can only make sure that the costs are controlled in such a way that you can still gain some profits out of it, if possible. So the profit might be different for a CBU as compared to the CKD. Because of this point, in our judgement, when we do our pricing of the products, we do competitive analysis, as to what is the customer expected price of the vehicle vis-à-vis the specs that he's getting? You're talking about premium and super premium vis-à-vis the specs that he or she is getting, as far as the clientele is concerned, demographically, I may divide my market into age brackets, income brackets, professional brackets, etc, etc. But psychographically, I have only one thing in common amongst all these people. Why do you find that Lexus in a garage? It is because the owner is a design connoisseur, has an eye for detail, and appreciates Japanese craftsmanship. These are three things that you will not get away from.
Q. What sort of volumes is Lexus seeing in India?
There was degrowth during Covid but last year, we grew about 76%. As far as business is concerned, we are in 4 digits for volume. I'll give you some statistics. We have grown by 76% and the business size that has grown versus 2021 is more than three times. I want to continue this journey of growth and hopefully end this year with more than two times what we did last year. That is our goal.
Q: What's your current product line-up looking like and what new cars will you roll out here?
We had six products to introduce Lexus to India, and one of them is locally produced, which we are proud to do because there are only four countries across the globe that are allowed to make a Lexus. This may sound very high handed, but we feel that the brand needs that curation, that direction and the focus. Now we will add the RX, which is a crossover SUV, which we had in the previous avatar, before the full model change-over. Then during this year, we will also have the super and high luxury mobile office which is the LM. The new avatar will be launched soon at the Shanghai Motor Show, and we will be coming to India towards the second half of this year. These are additions to our product lineup, but all of these have one thing in common: they are self-charging hybrid electric vehicles. Of my portfolio currently, 97% is self-charging hybrid electric vehicles because we feel that multiple pathways are there for carbon neutrality. We've chosen to focus on self-charging hybrid electric vehicles, because of the infrastructure availability, charging infrastructure and capability of people to charge these vehicles.
Q. Will you add more car-models in local manufacturing?
We have intentions, and we've learned a lot about local manufacturing, the capability of the vendors was never a question for us. And now we want to kind of request our head office to get more products in the local line space. The overall industry size has to grow. Otherwise it becomes a one-on-one negotiation. So what's the tipping point? Minimum sales of about 1000 vehicles a year per model would be a tipping point and the industry tipping point, once it reaches close to one lakh. It is also worth noting that the industry that I come from, has the same number of variants and models as the mass market where we are just 1% of the total market.
Q: Clearly the growth of the luxury car market has supported Lexus in general?
That's the most important thing. Currently for India last year the mass market saw 23% growth, the luxury car market 53% growth, and Lexus India saw 76% growth. If this continues, the total penetration of the luxury car market into the overall car market will likely grow. Mindsets have changed, people are willing to spend, people are willing to express but if this goes, then there will be a tipping point, which in the mass market, is called motorisation. I don't know what the technical word is in our market. Once that happens, sky's the limit.
Q. Will you be expanding your network?
We started last year with four showrooms in four cities and ended the year with 17 outlets, which is 17 touch points in 13 cities. But as far as dealerships are concerned, we have to be very careful. I can't have customer satisfaction from an unhealthy dealer in terms of financials and certainly not at the cost of the balance sheet. We don't want anybody in the system, including our dealer partners or our consumers to have a situation where they are not taken care of. So hopefully by the end of this year, we should be present in 25 cities.
Q: How does Lexus rate India compared to other Asian markets in terms of growth?
If everything goes well, Lexus India should end this year by being number one in Asia Pacific, excluding China and Japan. That is in absolute numbers. Now that's a big statement to make, but we have been steadily growing our market.