Japanese Luxury Cars Overtake American Cars in the

US Market

•In the US luxury car market, two Japanese automakers,

Toyota and Honda made a mark for themselves and
outperformed luxury cars made indigenously by American
automakers like General Motors and Ford.
 Objectives of the Case Study

• To understand the competitive scenario in the US

luxury car market.
• To analyze critical success factors for Japanese luxury
car manufacturers in the US soil.
• To assess the potential challenges to the Japanese
automakers in the US luxury car market
“You can dig in to the particulars around
products and manufacturing processes for an
explanation, but I guess the broad impression
is that US companies don’t tend to be good
learning organizations, which is something
Toyota and Honda are superb at”
- John Paul MacssDuffie, Prof of Mgt,
Wharton University.
• It had never happened before, An US consumer
report, in the catalog of recommended
automobiles, quoted only Japanese cars as “Top
Picks” for 2006.
• The US companies had tried to overturn the belief
that Asian companies made high-quality cars, but
evidently, without much success.
WHAT MAKES A LUXURY CAR?

• The primary criteria for a luxury car were its comfort,

look, amenities as well as performance, economy,
sophisticated technology, high grade quality of
material and utility.
• Kelly’s Blue Book(KBB) provided price-based
classification of luxury cars.
• The lowest price of a luxury car was approximately
$36,000.
• The car was defined as a ‘luxury car’ if it was either
built by a luxury car manufacturer, or if its base price
crossed $36,000.
 LUXURY CAR MARKET IN THE US

• American luxury cars were considered as the

benchmarks until the mid- 1960s.
• The popular brands like Ford’s Thunderbird, Lincoln
and General Motor’s Cadillac were considered as
examples of good design and performance.
• From 1990 onwards the American luxury car industry
became home for several overseas carmakers like
Toyota(Japan), Honda(Japan), Nissan(Japan) and
BMW(Germany) in addition to the local players- GM
and Ford
• Consultant CSM Worldwide predicted that overall
luxury sales, estimated around 13% of the total
automobile market in 2006, would go up to 17% by
2012.
“Premium luxury is going to grow faster than mass
market in the next few years,”
predicted Mike Jackson, CEO of AutoNation(AN).
• It was expected that automakers would introduce
129 new luxury models from 2006 to 2012.
 JAPANESE STEPS IN US SOIL

• In 1986, Honda started a new division called Acura in the US.

And Honda became popular as the first Japanese luxury car
company to enter into a market of luxury cars in a foreign
country.
• In 2003, Acura TL came to the market and soon became a high-
selling luxury car in America in the same year.
• In September 1989, Toyota(Japan) started the sales of its Lexus
luxury cars(LS400 and ES 250) exclusively in the US market
• In the same year(1989), Nissan introduced ‘Infinite’ as a reply
to the luxury cars of Honda and Toyota.
• In 1990, Lexus achieved sales of 60,000 cars,
exceeding its goal by 3,000 units and in 1991, it
became No.1 brand selling overseas luxury cars in the
US.
• Lexus got the name best-selling car brand in America.
 THE REASONS BEHIND JAPANESE SUCCESS

Less Fuel Consumption:

• Analysts opinioned that most of the Japanese cars were scoring
over American cars because of their fuel-efficiency and
competitive pricing
• Toyota saw 12% sales growth while Honda, which usually
showed itself as a leader in energy efficiency, saw 7% increase
in sales.
“Honda had spend the last 36 years building its brand around fuel
efficiency, even when gas prices were low,” said Dick Colliver.
“Now that fuel efficiency rates higher in the purchase decision,
customers are turning to trusted brands associated with
excellent fuel economy.”
Eight-Speed Transmission:
• The Lexus Ls was driven by a V8 engine of about 380
horsepower, equipped with an automatic, eight-speed
transmission, a world-first, the Ls 460 would reach the
speed of 60 miles per hour.
“The Lexus LS 460 was designed to expand the definition of
the full-size luxury sedan,” said Jim Press
Price Factor:
• The average starting prices of Japanese cars were less than
the average starting prices of luxury cars made by US auto
majors GM and Ford
• Toyota follows JIT(Just-In-Time) method and the Toyota
Production System(TPS) to minimize production cost
through eliminating ‘muda’ (waste) from the production
process.