Luxury brands have a problem they didn’t have five years ago.
The biggest threat to Lexus, BMW and Mercedes-Benz isn’t another German prestige badge. It’s a wave of Chinese manufacturers delivering beautifully finished interiors, cutting-edge technology and generous ownership packages at prices that would have seemed impossible not long ago.
That’s changing what buyers expect from a premium vehicle.
The badge still carries weight, but it’s no longer enough on its own. Buyers spending $80,000 have more choice than ever, while those with $50,000 to spend can now buy vehicles with equipment, comfort and technology that challenge traditional luxury brands.
Against that backdrop, Lexus has expanded its Encore ownership program from three years to five, combining servicing, warranty, connected services and lifestyle benefits into a single package for every new vehicle sold in Australia. Officially, it’s about delivering a better ownership experience. Unofficially, it’s another sign that established luxury brands know the market has changed.
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ABOVE: Lexus Encore, connected services, and Lexus cars
Companies such as Zeekr, XPENG, Denza and premium offerings from BYD have forced the industry to rethink where value comes from. Many have with panoramic displays, advanced driver assistance systems, smartphone integration and connected services that were once the exclusive territory of prestige manufacturers. Now that is all commonplace
Some even include customer loyalty programs, app-based vehicle management and over-the-air software updates as standard, even on budget models.
Many do it for tens of thousands of dollars less, that doesn’t automatically make them better cars, but it does make them difficult to ignore. For Lexus, competing on price has never been the objective, because, it can’t. Instead, it is strengthening the parts of ownership that extend beyond the vehicle itself.
Under the revised Encore program, buyers receive five years of capped-price servicing, roadside assistance, warranty support and connected services, along with lifestyle benefits including hotel partnerships, dining experiences, fuel discounts and service loan vehicles.
Flagship models continue to receive Encore Platinum, adding Lexus On Demand vehicle access, valet parking and airport lounge passes, while existing owners can subscribe to Encore Elevate once their complimentary membership ends.
It’s a comprehensive package, but do buyers shopping in today’s premium market place greater value on airport lounge access and restaurant invitations. Or, would they rather have faster charging, newer software, more advanced technology or a lower purchase price?
That’s the challenge every established luxury brand now faces. In fact, the lagacy brands generally are facing an uphill battle. The traditional formula of superior craftsmanship and brand heritage isn’t under threat because those qualities have disappeared. It’s under pressure because competitors have become remarkably good at delivering many of the same experiences without the premium asking price.
Lexus isn’t alone in responding.
Across the industry, manufacturers are investing more heavily in ownership programs, connected services and customer retention as they work harder to keep buyers loyal beyond the initial sale. We cite BYD’s performance last month as an example. For years, Toyota sold more than double the next 2 brands combined, but the new Chnese car maker was within a few hundred cars of dethroning Toyota, perhaps for good. Tesla was the top-selling model with Model Y far ahead of Hilux or Ranger. Why? Connections.
And in many ways, the car has become only part of the product, the ownership experience is increasingly just as important.
Whether that proves enough to counter the rapid rise of ambitious Chinese challengers remains to be seen, but one thing is clear. Luxury brands can no longer assume their badge is the biggest reason people walk into the showroom.
Today, they’re expected to earn that loyalty long after the keys (or phone verifications) have been handed over.
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Alan Zurvas is the founder and editor of Gay Car Boys, Australia's leading LGBTQI+ automotive publication. Before launching GCB in 2008, Alan's automotive writing was published in SameSame.com.au and the Star Observer. With over 16 years of hands-on car reviewing experience, Alan brings an honest, irreverent voice to every review — championing value and innovation over brand loyalty.
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