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Mark Rechtin of <I>Automotive News</I>, whose recent article on the next Lexus IS appears here just a couple of stories down, has written a fascinating, thought-provoking piece on Lexus' success and where it's headed. The article, titled <B><I>Lexus says its growth won't hurt brand's cachet</I></B>, also appears on <I>AutoWeek</I>'s website.<P>

Sales at Toyota's 15-year-old Lexus Division reached the 2 million mark this month, a milestone that is triggering concern about diminishing exclusivity for the luxury brand. <P>

It took Lexus more than 10 years to sell its first million units in the United States but only four years and four months to sell its second million. And Denny Clements, Lexus Division general manager, projects that the third million will take just three years and six months. <P>

Lexus is taking steps to protect its dealership service standards as its volumes increase. But executives say they aren't worried about becoming less exclusive and won't cap Lexus' growth. <P>

Executives say buyer conquest and loyalty rates are rising simultaneously, a rare combination that they say accounts for the luxury brand's growth spurt. <P>

Lexus sales have risen from 97,593 vehicles in 1997 to 259,755 units last year. Sales jumped 25.3 percent in the first quarter of this year compared with the same period in 2003. <P>

But some analysts warn that Lexus is in danger of losing its cachet. <P>

"There is always a risk that if everyone at the shopping center has a Lexus, then it's no longer of interest," says Todd Turner, analyst with Car Concepts in Thousand Oaks, Calif. <P>

But Yuki Funo, CEO of Toyota Motor Sales U.S.A. Inc., says Lexus should sell as many vehicles as customers demand and not restrict volume. <P>

"Luxury is not always because the product is rare," Funo says. "We are appealing to the luxury market by the strength of our product, franchise and customer service. Lexus has been successful in keeping the integrity of its franchise despite the volume growth." <P>

Funo says there is more danger in failing to maintain customer service standards with a larger owner base than losing exclusivity. <P>

Clements says Lexus dealers have invested $750 million to upgrade or expand their stores in the last 20 months. <P>

The brand has grown in both loyalty and conquest rates over the past three years, according to consumer purchase data tracked by the Power Information Network. <P>

Last year, 44 percent of all Lexus vehicles that were traded were done so to purchase another new Lexus vehicle, the Power data show. That compared with 31 percent in 2002. The figure in the first quarter of 2004 was 48 percent. <P>

What's more, every luxury brand except Saab is seeing a greater percentage of its customers depart to Lexus than they were three years ago, according to Power. <P>

Lexus says it had a conquest rate of nearly 70 percent in the 2003 model year, representing buyers who came to Lexus from another brand. The rate of buyers replacing a Lexus purchased new with another new Lexus was 54 percent in the 2003 model year.
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