PARIS - Japanese automakers will struggle to crack the premium car segment in Europe, where tradition and prestige dominate, making their plans to gain global acceptance for their luxury brands tougher.
After nearly 20 years in Europe, Toyota Motor Corp's Lexus marque sold just 36,000 cars in Western Europe last year, compared with about 650,000 to 720,000 sold each by Mercedes-Benz , BMW and Audi, and a fraction of Lexus' own global sales of 518,300 vehicles.
Even though Lexus, sold in 69 countries, is the top-selling luxury brand in the United States, analysts say it has a long way to go to join the German powerhouses on the global stage.
"They occupy only a fraction of the European market now, and it'll be the same in the future as well," said Koji Endo, auto analyst at Credit Suisse.
Making a dent in global luxury car markets is important for Japanese automakers because high-end cars support profit margins, which are under pressure from the shift to cheaper, smaller cars and the growing need to clean tailpipe emissions.
HSBC auto analyst Seiji Sugiura estimates that while Lexus represented 7 percent of global sales in 2007, it accounted for 16 percent of Toyota's operating profit.
Toyota has been trying to use its lead in hybrid technology to sell the Lexus brand in Europe on the idea of twinning extra power with fuel efficiency, but this has done little to attract customers away from other brands.
"A lot of our Lexus products are still rather U.S.-centric," Toyota Europe head Tadashi Arashima told Reuters at the Paris Motor Show.
Established local brands in Europe, the world's toughest luxury car market, appear confident the gap will not close soon.
"Audi had a long way to go until reaching a position like the one we have today," Rupert Stadler, chief executive of Volkswagen's premium brand, said at the Reuters Auto Summit this week. "I would say it will be difficult for Japanese premium brands to really step in that market."
EPIC
Nissan Motor Co, which follows Lexus into the western European market this month, says it is pursuing a different strategy to ensure its Infiniti brand catches on.
"For us, the introduction in Europe is epic," Nissan Executive Vice President Carlos Tavares said this week at the opening of Infiniti's first showroom in Western Europe, in the posh Mirabeau residential district in Paris.
"It's not just that Europe is a competitive luxury market. It's that we are seeking to change the game a bit."
Nissan Europe Senior Vice President Eric Nicolas said the Infiniti business model would be separated from Nissan proper from the start, with products adapted to local needs. Lexus initially sold its cars in Europe in Toyota showrooms.
"We're not going for a 'me too' product; we're going for the opposite," Nicolas said at the Reuters Auto Summit.
He added that Japan's No.3 automaker had had plenty of time to learn from the mistakes of others and had no illusions about competing head-on with German rivals.
Nissan will first introduce the FX50 sport utility vehicle, the G37 sedan and coupes, adding the G Convertible to its European line-up in mid-2009. It is targeting annual sales of 25,000 Infiniti cars in 2013 in Europe. Last year, it sold 153,000 globally.
Niche or not, Nissan faces a tough time in a market where luxury cars have been hit harder than mass-volume cars this year.
"It's one of the worst times to be entering this market," said Credit Suisse's Endo. "Overall demand in Western Europe is nosediving, not just for luxury cars but small cars. And it's just the beginning."
Honda Motor Co, which established its premium Acura brand two years ahead of Lexus and Infiniti, in 1987, is staying away from Europe for now.
"It's a tough market," Honda Motor Europe chief Shigeru Takagi said recently. "There are so many established brands. To succeed in the Western European market is no small feat."
But Takagi said Honda was considering launching Acura in Russia, where luxury goods are still in high demand.
Audi's Stadler said doing well in Russia was no indication of a successful premium brand.
"Positioning, pricing, product, quality -- all these things have to come together on the right meeting point. If you try to conquer the markets only price-wise, there will always be a question of whether it's the real premium."
