Toyota has said it plans to increase its already strong U.S. commitment to hybrids by making individual hybrid variants of all its models in coming years but the automaker has already gone beyond this in Europe where 92 percent of all Lexus vehicles sold are hybrids.

That’s correct. Rather than merely having an electrified and conventional version of the same car, in some markets Lexus is exclusively hybrid, and overall 92 out of 100 Lexus vehicles delivered in a 16-nation European market are hybrid.

This compares to 23 percent hybrids for Toyota of Europe, and 16.9 percent for Lexus in the U.S. It also towers over the total U.S. market where 3.5 percent of all passenger vehicles sold are hybrids, and in qualified terms it far surpasses European competitors.

How did Lexus of Europe wind up so far ahead of the curve? And are Toyota’s U.S. operations due to follow to one degree or another in the coming decade?


Eight years ago Lexus was confronted with a decision in the face of entrenched European luxury carmakers which were mastering mid-sized clean diesel engines. Lexus was trying to strengthen a small foothold with larger, multi-cylinder petrol engines that had initially been tailored for the U.S.

With European car preferences ranging from loyal to nationalistic in favor of domestic brands, Lexus in Europe had less market share than its U.S. counterpart and hovered below 1.5 percent in the “premium” (luxury) segment.

According to Toyota Communications Senior Manager Bart Eelen and Etienne Plas from Lexus of Europe, the division decided to head toward hybridization exclusively or nearly so around 2005 with the advent of the RX400h, and as subsequent models came along.

Europe’s market is highly regulated with varying tax penalties, incentives, and a bigger focus on CO2 and other emissions. This is the flip side to the mpg issue Americans more often pay attention to, although really these can play hand in hand.


What Lexus did took it from being an also-ran with arguable competitive value to a still-small player, albeit with niche status.

“With the advent of hybrid technology, we were able to offer an alternative that matched the expectations of the bulk of the premium segment in terms of fuel consumption and in many countries also taxation brackets,” said Eelen.

Hybrids were also ideally suited to urban stop-and go conditions, and offered refinement and ease-of-driving unmatched by diesels.

Worth It

Prices and taxation vary in Europe, but using Germany as a benchmark, Eelen said today the effective surcharge to buy, for example, a hybrid IS300h over a comparable conventional IS250 is 2,500 euros – about 36,700 euros compared to 34,200.

In return, hybrid buyers receive horsepower increased from 208 DIN to 223 and CO2 is halved from 199g/km to 99 g/km.

“In a lot of European countries, the customer would make good on the initial investment within one or two years, due to tax,” said Eeelen. “Not to mention fuel cost and residual value. So financially, hybrids makes sense.”


An exception to all this hybridization is Russia, where it and neighboring states – Kazakhstan, Ukraine and Caucasus – more closely resemble the American market.

There big gas engines remain popular. Fuel is cheaper and CO2 based taxation is nonexistent. These countries get cars the American market does, but the rest of Europe does, not including the ES, GX and the LX not to mention the Toyota Camry, built in Russia.

Lexus’ hybrid-focused European market consists of Germany, France, UK, Italy, Spain, Netherlands, Belgium, Portugal, Greece, Ireland, Austria, Switzerland, Denmark, Sweden, Finland and Norway.

Niche Brand

No other European competitor comes close to the Lexus hybrid formula, and even as the German 3 have embarked into electrification, they are reformulating – and arguably have yet to match – Toyota’s concept of a fuel- and emissions-efficient hybrid that still delivers acceptable power.

To date, cars from BMW, Mercedes-Benz and Audi (and Porsche) have used the electric motor to tip the balance in favor of more go-power, using it like a zero-emission turbo.

SEE ALSO: 2013 BMW ActiveHybrid 3 Review

As an example more familiar to Americans, the Lexus 300h hybrid blows the comparable Lexus ES350 out of the water with 16 more mpg and less CO2 in the test cycle. By contrast, BMW’s ActiveHybrid 3 squeaks out 2 more mpg than the 335i. The surcharge to go hybrid with the Lexus siblings is half or less to do the same with BMW, and the efficiency tradeoff justifies the choice.


At the same time, as Toyota’s upscale brand does in the U.S., Lexus of Europe enjoys consistently superlative customer satisfaction ratings, and can offer intense hands-on service due to its smaller footprint.

Although European economies have been hit-or-miss, they represent a bit larger market than America. Europe’s full volume in 2012 including Russia and neighbors was 15 million units. The premium segment was 2.9 million, and Lexus did 46,000 units.

Excluding Russia and neighbors, the 16-nation European market bought 11.2 million cars. Its premium market consists of 2.7 million units, and Lexus sold 27,000, just 1 percent.

Lexus’ market share varies however and in the UK and Spain, it sold 1.5 percent, and in the Netherlands, it sold 4 percent.



By comparison, German 3 brands registered (including Russia and neighbors) in 2012 were: Audi with 770,000, BMW with 707,000, and Mercedes-Benz with 660,000.

The U.S. picture is much different for Lexus. In 2012, American bought 14.4 million passenger vehicles. Through August 2013 this calendar year, the U.S. total stands at 10,647,486. The luxury segment is at 1,178,433 or 11.1 percent of the total.

Lexus has sold 171,238 vehicles which represents 14.5 percent of the total luxury segment.

Luxury car market share for Lexus in the U.S. is triple to 10-times that of individual European nations, but its hybrids are far fewer by percentage, being just 16.9 out of 100 compared to 92 out of 100 in the 16 European countries aside from Russia and neighbors.

Perhaps some might wonder if Lexus of Europe is making a mistake? It did actually see a 1.5-percent market share in 2008 decline to 1.1 percent for 2009 and 2010, but Eelen says this had nothing to do with hybrids being the wrong choice.



“The drop after 2008 shows that focus on CO2 was increasing, and at the same time that the premium segment in general was evolving to include more compact cars,” he said. “The growth in 2011 came from the introduction of the CT200h, that strengthened our position mainly in Western Europe.”

In 2011 and 2012 Lexus was back up to 1.5 percent and its long term vision includes more hybrids, as well as the plug-in variety and fuel cell vehicles in due time also.

“We have a clear edge there over our European competitors here. Our scale allows us to deliver a very personal service,” Eeelen said. “Going forward, we may see some positive evolution in terms of market share, as our product offer matches the needs of an increasing number of customers (CO2 again). But our primary goal is not growth – it is to continue to deliver an ever improving customer experience, which provides a solid base for our brand in Europe.”

American Future?

For now, U.S. Lexus is happy with its product assortment, and Eelen agrees it “is an excellent match” for the market and regulatory environment as it stands.

However U.S. regulators are now operating under a stricter “One National Program” mandating automakers’ fleet average fuel economy and greenhouse gas emissions. Over the next several years requirements will be pushed up European-style by federal and California pressure.

SEE ALSO: CAFE Rules: Only 1-3 percent of cars need to be electric by 2025

Corporate Average Fuel Economy (CAFE) and California Air Resources Board (CARB) mandates are pushing for higher mpg and cleaner air beginning 2017 through 2025, and California is actually looking beyond to 2050 as are the Europeans.

Thus far Toyota has resisted diving into battery electric cars anywhere close to the degree Nissan-Renault has.

Toyota global products assembled in Michigan last week. (Click image to expand).

Toyota global products assembled in Michigan last week. (Click image to expand).

Last week in Michigan, Toyota’s Tom Stricker, vice president of Technological & Regulatory Affairs, gave a telling remark to a room full of journalists. He said eking out relatively minor annual sales of 5-10,000 units or so from all-electric zero-emissions vehicles is not enough to swing the needle enough in Toyota’s favor.

SEE ALSO: August Sees Ups and Downs For ‘Little League’ EV Players

Calendar year to date, Nissan has sold just over 14,100 Leafs in the U.S. although it is investing heavily in an all-electric future.

Toyota is too even if it’s not putting nearly as many EVs on the road yet. But meanwhile, we also know who dominates the first four spots in the hybrid sales charts including the progenitor of Toyota’s 23 total “Hybrid Synergy Drive” variants: the Prius Liftback, a volume product, and the top seller in California.

Building on its strengths, Toyota says by 2015 it will roll out 15 new or redesigned global platform hybrids, with undoubtedly more to come. Some of these will be Lexus badged, although Toyota does not divulge too many specifics.

The takeaway here is Toyota has been and will be definitely all about hybrids and Lexus of Europe is a remarkable over-the-top extreme.

As American regulators look to more closely emulate Europe, Toyota has been learning lessons there for years that will help it tailor its mix here in years to come.