Toyota entered the premium (luxury) market with Lexus when it launched the LS400 at the North American International Auto Show in Detroit in January 1989. The car was launched as a 1990 model, with the first deliveries beginning in September 1989.
Lexus was conceived internally as F1 (Flagship 1) in 1983 to create a luxury sedan. Luxury cars were very profitable, and North America was the world’s most prominent luxury car market. Toyota, already a well-established brand globally and in America, saw this as the right time to move upmarket and take a slice of the European domination.
Another important reason was the VER (Voluntary Export Restrictions), a self-imposed (but supported by the Reagan Administration) policy by the Japanese government that restricted a Japanese manufacturer from importing 1.7 million cars a year to the US. With the absolute numbers fixed financially, increasing the per-car profit through luxury models made more sense.
It was also essential to dissociate the brand from Toyota, known for reliable, economical vehicles, and launch a new car that would match global standards for luxury and performance. Could a Mercedes or BMW buyer imagine driving around in a Toyota?
Lexus wasn’t the first Japanese luxury brand to enter North America—Honda launched Acura in 1986. Acura’s success further cemented the belief that a non-European brand could find favor with American customers. This encouraged not just Toyota but also Nissan to launch its luxury brand, the Infiniti, also in 1989. Of course, VER was another factor.
The Japanese were innovative in adopting the strategy of creating luxury brands that were separate from their main offerings. A fact that VW failed to realize when they launched their luxury sedan – the Pheaton a few years later. I would have loved for the Pheaton to succeed. We will cover that story separately.
The LS400 surprised the market with its build quality, smoothness, noise control, and soon also its rock-solid reliability. The car was so well received that Lexus not only overtook Acura but also became the most desirable luxury brand, beating the established incumbents: the Mercedes-Benz S Class, the BMW 7 Series, and the Jaguar XJ Series. Since its launch, Lexus has ranked at the top for these qualities.
I have many friends who own Lexuses, and they swear by it. The brand loyalty is unprecedented.
Making cars, especially good cars, is hard! Very hard! So, how could Lexus create such a great vehicle in its first attempt?
Toyota had long made good cars, so it knew the basics. However, a Lexus was not just a Toyota. It had to build a world-class sedan that could beat the German brands while being more reliable and cheaper. These were tough goals to achieve.
The answer lies in the meticulous and massive work Toyota’s engineers and researchers did for this project.
The Lexus team researched the American consumer’s definition of a luxury vehicle. They drove the prototypes for millions of miles and fixed everything they found to be an issue.
Years of hard work proved fruitful because the LS400 was better at its launch than any luxury car (or any car at the time).
Lexus takes credit for several innovations right from the first model. Some of the most important ones are:
- A brand new 4.0L V8 fit for a luxury car in the 1990 LS400
- World’s first 6-CD changer
- Seat-suspension
- Collapsible steering column
Lexus will continue doing what it does best, i.e., build great cars. The revolution it created with the LS400 hasn’t been repeated, and today’s luxury buyers don’t look at it the same way. With the proliferation of automation and electronics, the brand’s reliability has suffered, but Lexus still sits at the top of consumer ratings like JD Power.
With the global focus shifting towards EVs, we will see most Lexus lineups converted to electric ones. Toyota is among the few manufacturers still pursuing Hydrogen and Fuel cell vehicles. It will be fascinating to watch the innovations Lexus brings to the market.
