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Business news, 28.10.2005 14:18

Growth Lets Lexus Lead Russian Expansion

lexus_toyota The car company Toyota Motor will dramatically increase the number of its Lexus luxury brand dealerships in Russia, expecting stable growth in sales over the coming years, the company president said Wednesday.

Next year the company plans to introduce six new showrooms, said Tomoaki Nisitani, president of Toyota Motor, the company that represents Toyota Motor Corp. in Russia. The company first appeared in Russia in 2002. There are currently only four Lexus dealers operating in Russia - two in Moscow and two in St. Petersburg.

By October of this year Toyota Motor had sold 4,000 Lexus brand cars in Russia – a 50 percent increase on the same period last year. Nisitani hopes to sell a total of 5,000 by the end of the year and expects further sales growth in 2006.

“Lexus has huge potential in Russia,” Nisitani said.

A car industry expert saw Toyota Motor’s sales plans as realistic.

“I think the company carefully estimated its capabilities. Lexus market performance this year apparently proved the sales forecast correct,” said Alexander Bragin, consumer industrial products group leader at Deloitte.

Although Toyota Motor is staking a growth in sales on its Lexus RX400h and Lexus GS430 models, introduced in Russia last year, it has also just launched the new Lexus IS250 – the seventh Lexus model to be sold in Russia. It was recently previewed at St. Petersburg’s car exhibition “Auto + Automekhanika,” and is set to go on sale at the start of next year.

Nevertheless, as plans for new Lexus dealerships to be based in Moscow, Samara, and Yekaterinburg take shape, existing showrooms are at full capacity.

By way of comparison, Ford Motor Company increased the number of Jaguar dealers in Russia from three to seven over the last year, while its sales forecast for 2005 is only 500 cars, Sergei Gurdzhian, marketing manager of Jaguar Land Rover Russia said earlier this year. That is ten times less than for the Lexus.

“Expansion of sales offices is a good sign from the customers’ point of view,” Bragin said.

According to PricewaterhouseCoopers, sales of new foreign models exceeded $9 billion last year, representing more than half of total sales. From 2003 the market grew 35 percent in money terms while the total number of cars sold increased by only seven percent, up to 1.6 million cars.

“Consumer interest is growing in more expensive and higher-quality cars, with imported brands the primary beneficiaries,” according to the 2004 global financial review of the car industry carried out by PricewaterhouseCoopers.

Considering the stable demand for foreign cars in Russia, any expansion of luxury car dealers in Russia could be limited, among other factors, by the “company’s ability to control dealers, keep up with demand, and maintain a single standard of quality. Some companies effectively manage more than 10 dealers and fail to control their representatives,” Bragin said.

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