By on May 4, 2010

Imagine you’re an automaker which enjoys an unprecedented drivetrain technology advantage over all other manufacturers. Imagine you build a brand around that drivetrain that becomes a cultural touchstone, a symbol of your firm’s technical prowess and commitment to the environment. What do you do next? The obvious answer is to build a luxury version to help make the extra profits needed to pay for the drivetrain’s development, right? Well, Toyota did just that, piggybacking the Lexus HS250h on its strong Lexus brand and Prius technology. The only problem? It’s not working.
Through the end of April, Toyota has sold only 11,228 of its HS250h “Prius by Lexus” sedans since launching the model in August. Calendar year-to-date, only 4,529 units have been sold. Last month, volume dropped to 1,076 units. Compare those numbers to Toyota’s initial HS sales goals of 20k-30k units per year, and it’s clear that Lexus has a loser on its hands. So, what went wrong? Lexus VP Mark Templin tells WardsAuto:

I think we underestimated the power of the Prius brand… And we overestimated what the market would look like based on gas prices. But if we can do over 1,000 units a month, 1,000-1,500 units a month, we feel really good about what we’re doing in the marketplace.

That, or Toyota got caught by lazy, GM-style branding strategy. The HS was a “Buick Prius,” offering more weight, power, price and luxury than its iconic sibling, but none of its green halo, distinctive styling, or name-brand cachet. And did we mention that it looks way too much like a Corolla to be taken seriously as a luxury car? But the HS is also a symbol of a larger problem at Toyota’s luxury division: the inability to sell its pricey luxury hybrids in any kind of meaningful volume. Since the January, Lexus has sold only 119 examples of its GS450h hybrid, and a mere 40 LS600h sedans. Only the RX400h sells better than the HS, moving 1,232 units in April according to Wards. In contrast, the Prius sold 12,555 units last month, and has sold 40,793 units since January. Clearly Lexus still has some work to do before it can have real confidence in its luxury hybrid strategy.

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51 Comments on “Lexus Lowers Sales Expectations For HS250h...”

  • avatar

    IMO the only thing the HS250h shares with a luxury car is the Lexus nameplate. Apparently 99.99% of luxury car buyers agree with that assessment.

    As far as the rest of the Lexus hybrid lineup I think it’s more a reflection of the lack of interest in hybrids by luxury car buyers. To my knowledge no hybrid luxury car manufacturers are selling any appreciable numbers. That of course is subject to a big change with the upcoming CAFE standards.

  • avatar

    I don’t think it’s a problem of strategy, but a problem of price. The hybrid premium at Lexus is way out of line with the standard ICE offerings of the same model. Your average Lexus shopper probably doesn’t drive across town to save 5 cents on a gallon of gas, so fuel savings isn’t in their purchasing decision. If they want a green halo they’ll more than likely just buy a Prius as a 2nd car than opt for an identical vehicle with more batteries.

    • 0 avatar

      This is so true.

      Hybrid premium for RX SUV: $6K
      Hybrid premium for GS sports sedan: $11K
      Hybrid premium for LS luxury sedan: $40K

      They’re pricing themselves out of their own market. Any consumer with a brain knows that buying a hybrid luxury car is not the way to minimize driving expenses. But, “hybrid” does mean “less gas” in most people’s minds, and reducing the premium to a point where buyers can convince themselves that the hybrid is practical (even if it actually isn’t) would be smart. Also, even if customers are aware of hybrid car benefits (quieter, more powerful, and full of gee-whiz high tech), the steep premium price puts these cars in segments occupied by ICE vehicles that have plenty of power, serenity, and gadgetry.

  • avatar

    This is not really surprising. I like hybrids, I like Lexus as a brand and I like Lexus’ products. I still wouldn’t buy this car.

    The HS250 is chasing a market that doesn’t really exist. Hybrid buyers aren’t necessarily Lexus buyers—the Prius is more practical and makes a better statement—and the few that are would probably aim higher (the GS400h or LS600hL) or for something larger (the ES or RX).

    I’m actually surprised that they made this car instead of simply offering a hybrid ES. The Camry hybrid sells well, as does the “normal” ES. A marriage of the two would seem logical.

    • 0 avatar

      If Toyota came out with a hybrid ES that had all the techno toys of the HS and had the comfort and styling of the current ES, and didn’t cost mor than $5K more than an equivalent fully loaded ES350, I would drive to the dealer tomorrow morning and place an order. I’m sure many other people would, too. The ES is due for a refresh for the 2012 model year and a hybrid version may be released then. But, I think that’s a year too late. Competitors are bringing hybrid mid-sized sedans to market this year (eg Hyundai Sonata Hybrid – not exactly as luxurious as a Lexus, but then the HS doesn’t seem as luxurious as a Lexus should be, either).

  • avatar
    Rod Panhard

    The Prius itself was not intended to be a status symbol in the Toyota product line. However, it became a status symbol with buyers. So developing a “Lexus” version of it, is overkill.

  • avatar

    As I have long maintained, buyers don’t spend $50k+ with a interest in saving a buck on gas, and the upscale price premium for the upscale brand makes this even less attractive.

    A look at GM’s hybrid truck sales tells that story; they only move a handful of them.

    And Mercedes, Ferrari, and Lamborghini should take note of this lesson – just stick with what you do well. There are no points for ‘me-too’ if nobody buys your product.

    • 0 avatar

      Generally you’re right, but I would add that there’s nothing really wrong with making a version of a car that uses less fuel than it’s conventional brethren, but you have to market it correctly and understand that it’s just as much a halo as, say, an ultra-high-performance version. After all, the base S-Class is plenty fast already and it’s not like the AMG version will get you to work any quicker.

      This is the tack Lexus took with the GS, RX and (especially) LS hybrids and it worked. It didn’t generate volume sales, but it underscored what the brand stood for.

      Where you are correct is that Lexus, as a brand, can’t yet support a purpose-built hybrid, and that the HS doesn’t really “jive” with what Lexus was about. It’s good enough, in a way, but it’s small, meagre and rather mundane.

  • avatar

    Well…at least the American public is getting this one right. The HS is a text book example of value-free badge engineering, topping even the ES. Even more importantly, it’s uglier and cheaper looking than a Corolla, nevermind other near luxury offerings.

    The hybrid luxury cars do make sense to me however, as they are automatic-only killjoys anyway and the electric motors would provide for very smooth and quiet propulsion. The problem is, Toyota needs to apply some of that Avalon ad campaign magic to it’s luxury division if it wants to justify the price premium of the hybrid drivetrain. I have yet to see them really push the luxury hybrid thing as a luxury aid, instead I see milage comparisons vs. V-8’s and vague plays to social responsibility. For once Toyota, you have a real content advantage in the Lexus lineup and test drives might well be your friends, act accordingly.

  • avatar
    DC Bruce

    It appears that the Lexus hybrid strategy is still a work in progress.

    Until the IS 250H, the Lexus hybrids seemed to have been more about eye-popping acceleration without the tank-draining thirst of a big engine. The GS 450H runs like a 450 and drinks fuel like a 350, etc. The problem is that most luxury buyers are unmoved by a 5-6 mpg city increase in fuel economy and perhaps people are figuring out that a hybrid powerplant does very little to improve highway mileage. They’d rather go for the conventional, larger engine.

    The IS 250H is the first Lexus hybrid that seems to eschew that bias, and is more of a fuel miser with decidedly tepid performance. I agree with 200k-min: the buyer who’s really out for eye-popping fuel economy is just going to buy the Prius.

    Add to that the fact that the IS-series Lexus cars have not really had that much success in the market, as compared to the Infiniti G’s, Audi A5s, Benz C-class or, of course, the 800 lb. gorilla of the group, the BMW 3-series.

  • avatar

    Lexus just needs to market theirs hybrids as SUPER MEGA quieter than its gas counterparts.

  • avatar

    Actually, I did see HS in person and like it. The price tag is the only thing wrong here.

    At the current price, there is very little value presented to buyers. Here in Canada, it starts at 40k. Drop it to 30k, and I will buy one. (1 USD = 1.03 CND as of today)

  • avatar

    The planet conscious wealthy seem to prefer having a Prius as front car when needed for image purposes while keeping a garage full of full throated luxury and sports cars.

    Recall the awards ceremony where the concerned Hollywooders traveled by gas limo and then got into a Prius a few blocks from the event.
    They then rolled up to the red carpet looking green.

  • avatar

    We were looking at a used Lexus (non-hybrid) RX recently . It’s interesting to see how cheap the RX 400h (hybrid) are compared to the RX 350. Since some of these vehicles are entering their 5th year of battery life I wonder if the potential pending battery replacement is devaluing them significantly.

    Seen the same thing with Hondas, and Toyotas but not quite so drastic.

    Maybe the battery is priced more than the Toyota equivalent.

    Maybe Steve Lang could chime in and tell us how these vehicles are doing at auction as used cars.

  • avatar

    Load up an HS and you’re still spending less money than a Volt econo-box.

    • 0 avatar

      +1, and getting a much better deal all the way around.

    • 0 avatar

      Excellent point! The Lexus trend sure doesn’t bode well for Volt sales once the initial furor wears off.

    • 0 avatar

      1) The Volt pricing hasn’t even been released yet.

      2) The Volt will go 40 miles without any electricity. The HS250h is rated at a pathetic 35/34…far worse than the larger Mercury Milan hybrid, so comparing it to a Volt is disingenuous from the jump.

      3) The Volt gets you a $7,500 tax credit, which further shifts the value equation in the Chevrolet’s favor.

      4)What is even the point of bringing the Volt into this? The Lexus is the failure and you feel like you need to divert the negative attention toward an American car to make things right for you?

    • 0 avatar

      1) Given GarbageMotors’ track record, it will be over schedule and over budget and thus resulting in a higher than predicted price.

      2) Both are 35mpg hybrids on a tank of gas.

      3) The HS costs less in MSRP and repair.

      4) They are both $30k-40k~ish hybrids. The HS is a failure compared to the Prius. The Volt is a disaster compared to the HS. But yeah, if you do have a point, then it must be this one. Who would in his right mind choose a garbage over a Lexus?

  • avatar

    I actually quite like the Lexus hybrid ad that runs almost incessantly during a NASCAR race of all things. The problem with it is, it doesn’t really do a good job convincing anyone they need a Lexus hybrid; only in informing people how long Lexus has been at it.

    I also question the logic of trying to sell a car on its fuel efficiency by featuring hundreds of them driving very inefficiently around an empty parking lot in various patterns and circles. Cool, but a waste of fuel!

  • avatar

    @ psarhjinian,

    I agree with you on all points except for the small part. I was parked next to a HS250h the other day and it positively dwarfed my E36M3. For the limited interior space it appeared to offer, the exterior seemed rather large.

    • 0 avatar

      I think that’s a function of the car’s wheelbase and the sheer size of modern seats. In the HS’s favour, it’s far less vertically cramped than your E36.

  • avatar

    So does this mean that GM made the right decision to cancel the Cadillac Converj?

    • 0 avatar

      Perhaps the Volt will be badge engineered into a Cadillac Cimmaron Hybrid.

    • 0 avatar

      Funny, I didn’t know it was dead, but that is the right call.

      This story says it would have struggled for a 20-mile range and cost another $30k, which is worse than I had imagined:

      So yes, I think the comparison of the viability of the Converj to the HS250h is appropriate, but I’d rather have the Lexus.

  • avatar

    The point of hybrids is to get great fuel economy, which this Lexus doesn’t get.
    So why bother?
    Lexus needs to come up with better technology, to get truly eye-popping fuel economy as well as spunky performance. Maybe a plug-in hybrid with big electric motors?

    • 0 avatar

      It does actually get very good fuel economy: there are very few non-hybrid cars that can hit that urban-cycle number, and exactly no luxury cars that can save from some Europe-only diesels that are much, much slower than the HS.

      You’re looking at the highway figure, which is relatively easy for many cars to approach if they have decent gearing and aerodynamics. By and large, most people (and certainly most luxury car buyers, who are generally urban) are not interstate-only cruisers.

      It’s a good hybrid, all things considered. It’s not a bad luxury car, either: it’s quite nice inside and rides very well.

      It’s just not a good Lexus.

    • 0 avatar

      “The point of hybrids is to get great fuel economy, which this Lexus doesn’t get. So why bother?”

      What’s the point of $120 yoga pants?

      For many hybrid drivers, great fuel economy truly is the goal (even if they didn’t do a long term cost analysis vs a gas only Corolla.)
      For others, it’s a green chic status symbol.

  • avatar

    It would be interesting how Lexus hybrid sales compare to the hybrid sales of, e.g. Mercedes, BMW. I could imagine that Lexus is far better off.

    Anyway, to save fuel or to save the planet by saving fuel would not be a top priority on my shopping list in this price category.

  • avatar

    From a performance and economy perspective a fully loaded 2010 Jetta TDI is a much better deal. It offers better performance,overall fuel economy unless you drive primarily in the city. handling and about the same amount of luxury all for $5-$7K less. A fully loaded Prius is $2500 cheaper and gives a lot better gas mileage. This is a car without a real constituency.

  • avatar

    I like Lexus, I bought an IS250. The HS is a decent idea poorly executed. It has unique (to NA) styling, but looks like a Corolla. Excellent mileage, but still worse mileage then a Prius (inevitable comparison). It’s relatively inexpensive. but is more expensive then the IS250.

    I have more hope for the CT200h because at least the sheetmetal is unique and a very different bodystyle.

  • avatar
    Rusted Source

    And did we mention that it looks way too much like a Corolla to be taken seriously as a luxury car?

    Bingo! We have a winner.

  • avatar

    The Prius is quite luxurious. I haven’t been in the third-gen one, but the second-gen has backup camera, nav system, and keyless entry as options. It’s also very quiet. I’ve heard the third-gen has even more features.

    The HS gets 10 mpg less than a Prius. I see no reason to get one over a well-equipped Prius.

  • avatar
    Ozzy Modo

    Lexus is Toyota on steroids. The Lexus brand must do whatever Toyota does, only much better. The HS does not improve on what a Prius does. That’s the problem. It’s a “worse gas mileage” hybrid.

    If the Prius gets 50 mpg, the Lexus should get 60, and have leather, wood, and Mark Levinson sound. The HS does none of this, hence it is a failure. It is also smaller inside, and uglier. As far as branding, it is a poor copy of a Prius at a much higher price.

  • avatar

    After the auto industry begins to really feel the strangle hold CAFE has on it they’ll wish they had a HS250h in their stable too. This is coming from a guy who doesn’t like Lexus.

  • avatar

    I think the blocky, narrow and awkward styling does not do this Lexus any favors…it’s really only attractive to someone who NEEDS a Lexus badge above all else, otherwise it makes little sense…

    The Prius can be optioned out with heated leather, moonroof, 17″ wheels, etc., to be quite luxurious…and a loaded Camry Hybrid can be optioned out similarly, has the same powertrain as the HS250, plus more interior room, all for a lower price.

    If the HS were based on the IS series (a MUCH more attactive sedan) it would probably sell better. Ugly AND expensive is not the way to make a sales blockbuster happen.

  • avatar

    I rather drive my 335d which gives 36 mph on highway, 0-60 in 5.7 sec and 425 ft/lb.

  • avatar

    Agree with most of the posts – it’s a poor Prius at a higher price. The last time I dropped off our hybrid RX 400h for service, I was given of these as a loaner. No comparison. I hated the HS. It’s cramped inside, buzzy with the CVT/4-banger setup, and looks like a Corolla. Just doesn’t seem like a Lexus.

  • avatar

    Lexus has sold only 119 examples of its GS450h hybrid, and a mere 40 LS600h sedans.

    That is still more that your beloved Audi could sell A8Ls. So who is your daddy now?

  • avatar

    I don’t know if it looks like a Corolla, but it does look too conventional. If someone wants a luxury Prius, they probably want the distinctive shape too.

    Another reason is that the new Prius is pretty nice inside.

  • avatar

    I’m in the market for a luxury hybrid, and have spent a lot of time pondering the HS250h. I may buy one eventually, but there are several things that prevent the HS from making me say “ooh, that’s a great car, I really want it”. I do hope Toyota doesn’t drop the HS but rather tries harder and makes it better. Problems:

    1. It doesn’t look like a Lexus inside

    Big hard plastic panels on doors and on backs of front seats, insufficient wood (no wood steering wheel), cheesy sun visors that don’t pull out when flipped sideways (and dangle at an angle when the too-skinny plastic extenders are slid out), plasticky non-folding ceiling grab handles, etc., look cheap. Absence of expected little things due to de-contenting reduces buyer enthusiasm, too: no light in center console box, no seat cushion extender (typical Toyota/Lexus seats have short cushions), etc. Plus, unless one special orders and waits 4-5 months, the car comes only with halogen headlamps and the standard audio system.

    2. It doesn’t feel/sound like a Lexus

    The front seatback lacks cushioning in the lumbar region (hard lump) – unacceptable. Ditch the enviro-friendly hemp-based foam rubber or whatever it is, and put in standard Lexus seats. The ridiculous 19″ wheels belong on a SUV, not a sedan, and make the ride too jittery and transmit too much road noise into the cabin. I’m ok with the four-banger making a little noise when accelerating heavily, since it’s quiet under most driving conditions. A tad more sound insulation would probably make many potential buyers happy, though.

    3. If equipped with the options a customer buying it for reasons other than/in addition to enviro/gas savings, it’s over priced.

    Let’s face it, this car’s demographic includes more technophiles than environmentalists or drag racers. My guess is they don’t sell many with the “sporty” Touring package. Advertising needs to stress all the high tech features and market them as fun, advanced, safety enhancing, etc. With this in mind, Toyota needs to realize that many potential buyers will price this thing fully loaded, and discover it costs nearly FIFTY GRAND out the door! That is too much – I can get a nicely optioned 3 year old LS430 for that price! Or, I could get a fully loaded ES350 and pocket $6K saved over the HS. Or, i could get a mid-optioned RX450h hybrid SUV. Either way, I’d get a car that looks and drives like a Lexus.

    4. Many new car purchases are impulsive, requiring the right car to be on the lot so the customer can get his/her instant gratification after just 4 hours of hassling with the sales and finance staff at the dealer. Unfortunately, if someone wants better than halogen headlamps on his $40K+ vehicle, or wants the luxury “Mark Levinson” stereo on his luxury car (what a concept!), he’ll have to special-order it from the factory and wait 4-5 months for delivery! That’s plenty enough time for some other shiny object to catch his eye and wallet.

    • 0 avatar

      I **seriously** dislike wood steering wheels. I’ve driven my parents’ ES350 a few times and my hands send messages of complaint when forced to touch the wheel. The ugly reddish wood Lexus chose doesn’t help matters, either.

  • avatar

    The GS450h is a horrible BMW, a mediocre hybrid, but an awesome Lexus.

    If I was a rich man, I’d own one.

  • avatar

    The model I saw at the auto show looked and felt….tinny and insubstantial, certainly nothing like the image of vault-like solidity that Lexii are supposed to impart.

  • avatar

    but none of its green halo, distinctive styling, or name-brand cachet

    This nails it. Prius buyers buy a Prius because it LOOKS like a Prius. It says, “look at me, I’m saving the planet,” more than any Synergy Drive emblem could.

  • avatar

    HS is a strange Lexus. But it doesn’t want to be Prius of Lexuses. Upcoming CT200h will cover that using Prius drivetrain with updated sportier suspension. HS is a link between CT and IS-Hybrid. Maybe after introduction of the next gen IS (hybrid), HS will go out of production. Current IS rwd platform cannot accomodate current hybrid technology without losing nearly all of its trunk space. Next gen rwd hybrid sedans from Lexus will have much more smaller but efficent batteries. 2012 next gen GS Hybrid will have full size trunk, as will the 2013 next gen IS hybrid.

  • avatar

    I think the HS is over $50k if you check all the option boxes. A $50k Prius!

  • avatar

    Neither I nor NA buyers see much market for this car.

    But… a little perspecitve. They have sold >1K/month. What did it cost to get this on the road? Toyota already had the drivetrain and the platform. If it didn’t cost much to do, maybe its’ breaking even or even clearing a little profit. It’s very doubtful that they’re losing very much at all. It’s almost certainly less painful, financially, than the Sky/Solstice program and might even be a better proposition than the Saturn Astra.

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