Lexus GX Sales Double, Profits Pile Up
The Lexus GX seems to truck along in the American marketplace with little fanfare. Aside from a brief rollover scare, the GX’s most notable achievement appears to be as the ride of choice for family members of Lexus dealer principals and Central Asian warlords. But Ward’s Auto reports that a bit of magic by Lexus product planners has helped double sales in just over a year.
According to Ward’s
Adding a lower-priced base grade for the GX’s ’14 refresh, by substituting fake leather for real leather and deleting some content, was key to this year’s sales jump, putting the SUV’s starting price on par with 3-row midsize CUVs.
Keep in mind that this is an SUV that starts at a hair under $50,000 – and only 20 percent of buyers are even opting for the base model. Most customers go for the $53,795 GX Premium, which ostensibly offers real leather and other stuff that one would expect on a pricey SUV.
Brian Smith, VP of Marketing for Lexus, told Ward’s that
“I think there’s a need for towing capability, without having to go all the way to a (fullsize) LX…So we’re doing everything we can to continue to keep Toyota focused on the need for GX.”
Sure, there is a need for towing capacity with these vehicles, but there’s another, unspoken reason why Lexus keeps the GX around: profit. The GX is based on the Toyota Land Cruiser Prado, a body-on-frame SUV related to the Toyota 4Runner, and sold in world markets as a family vehicle.
Taking an inexpensive vehicle that has had most of its costs amortized already (and is relatively simple to design, engineer and manufacture) and marketing it as a luxury item is a tried-and-true recipe for enormous gross margins that other players like GM, Ford and Nissan have all been exploiting for years now. It even works on unibody designs too (think Honda Pilot/Acura MDX or even Toyota Camry/Lexus RX). The body-on-frame design used by the GX just happens to be very simple technology that doesn’t cost a whole lot. When it’s sold as a silk purse, it becomes a very, very lucrative sow’s ear.
No wonder Smith speaks of his desire to “keep Toyota focused on the need for GX”. The SUV might as well be a printing press for the Lexus division, not just in America, but also in markets like China and Russia, where Lexus can charge whatever they please. And doubling sales of a product like this sure doesn’t hurt either.
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