Lexus of Europe’s Environmental Bet

Yesterday, Lexus unveiled its latest hybrid model, the CT 200h, a C-class five-door hatch at the Paris Motor Show.

Yesterday, Lexus unveiled its latest hybrid model, the CT 200h, a C-class five-door hatch at the Paris Motor Show. This vehicle is aimed squarely at the European market, where vehicles of that size are far more common than the big sedans and crossovers that are commonly seen on U.S. roads. (Another goal of the CT 200h, explains Mark Templin, group vice president and general manager of Lexus Div., Toyota Motor Sales U.S.A., is to provide an entree vehicle for younger buyers in the U.S., people who are looking for a way to get into the luxury brand at a lower price point; it will become the entry-level car in the division’s lineup when it goes on sale early in 2011.)

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But while the CT 200h is certainly an important product for Lexus in Europe, where sales are on the order of about a tenth of what they are in the U.S., what was perhaps more significant was the announcement that by 2015, all Lexus models sold in Europe will be hybrids. Yes, all.  So whether it is a CT, RX, or LS, compact, crossover, or full-size sedan, there will be a hybrid option.

Clearly, this is a strategy of differentiation in a luxury market that is dominated by the German Big Three: Audi, BMW and Mercedes. And while those companies are rolling out with various hybrids and showcasing their electric vehicle technology, their bread-and-butter internal combustion engine powered cars and crossovers are by far the most widely purchased products from those companies.  This Lexus approach is one that doesn’t feature just a hybrid outlier, but a full range of products.

While it seems that European buyers tend to be more nationalistic when it comes to buying cars than is the case in the U.S., where about half the market is non-domestic brands, which makes it more difficult for Lexus to make headway in that region, this bet on the environment could pay off better than trying to beat the others at their own game.