After almost 25 years, Japanese automaker Nissan is finally ready to bring their luxury brand, Infiniti, to their home market. According to a recent report from Nikkei, a Japanese business daily, the Japanese brand intends to debut their premium marque in the Japanese domestic market as soon as possible, perhaps even by the end of 2013.
To help put Infiniti’s previous absence from Japan, as well as its future presence, into the appropriate context, let’s quickly review why Infiniti launched in the first place…
The year was 1989 and rival automaker Toyota had just launched their premium nameplate, Lexus, in January. By November, Nissan had unleashed Infiniti to compete with Toyota and, more importantly, with the esteemed European automakers that had crept into the US market. Since its launch in the US, Infiniti has become a heavily European-centric brand, trusting that nine times out of ten the Americans will like what the Europeans like. And for the most part, they’re right.
Unfortunately, despite Infiniti’s lineup having no obvious disasters, it hasn’t inspired either. And despite association with the Red Bulll F1 team, the premium marque simply hasn’t pulled its weight in recent years. Apparently, the sub-brand only contributed 1% of Nissan’s total profits in the 2012 fiscal year. Compare that to Lexus, which contributes somewhere around 20% of Toyota’s total global profits. Infiniti sold about 120K units in 2012, while Lexus sold about 245K units; Lexus enjoyed 2,000% more profits than Infiniti for only 100% more sales. Obviously, something needs to change.
So, what is Lexus doing that Infiniti isn’t?
Well, for one thing they manufacture internationally. This means that they don’t rely very heavily on exports, which tend to sap profit margins. Conversely, Infiniti is manufactured almost exclusively in Japan, which makes it difficult to profit when the exchange rate to USD is unfavorable.
This leaves Nissan with two options for their luxury brand: they can either start manufacturing internationally, or they can begin selling their Japanese-made vehicles in Japan. While it seems likely that Infiniti will eventually begin manufacturing internationally, for now they’re content to take the easy route and start selling to the increasingly ravenous pool of Japanese luxury car drivers. The move makes perfect sense.
In fact, it’s a bit surprising that Infiniti has waited this long to take advantage of the domestic Japanese market. It seems likely that they could’ve been making profits there all along if they’d moved in when Lexus did back in 2005. Astonishingly, up to this point Toyota is the only Japanese automaker selling a premium marque in Japan. However, 2013 will be the last year that Lexus has Japan to itself.
Infiniti intends to make the transition into the Japanese marketplace as smooth and efficient as possible. They’re not going to be opening any Infiniti-only dealerships for the time being, instead they’ll simply offer current Nissan dealerships access to the full Infiniti lineup. They’ll also nix the entire range of repackaged Nissan Skyline vehicles, starting with the sedan, which will now be sold as the Infiniti Q50.
Will this work? Lexus was widely derided in Japan when it relaunched Toyotas as Lexus models — same old faces, with only the names changing. Even with ultra-sophisticated dealership experiences to differentiate Lexus from Toyota, the brand still took a while to benefit from all-new Lexus only models. And even now, Lexus still faces stiff competition from its sister Toyota range. With Nissan the differentiation looks like it will be weaker and the service experience no different from plain ol’ Nissans. Are they making a big mistake?
In May of this year, Nissan CEO Carlos Ghosn made it clear that Infiniti would not be deadweight forever. Between the currently favorable Yen and the introduction of Infiniti to Japan, Infiniti boss Johan de Nysschen expects to meet goals for a 6%-7% profit margin in the 2013 fiscal year, despite any launch costs associated with the new Infiniti Q50. It will be interesting to see whether even these relatively modest goals are attained.
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