High Tech Lexus

The priciest and most technologically advanced Lexus ever, the new LS600hL offers what BMW and Mercedes can't: a luxury hybrid

by Ian Rowley

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If the latest in auto gizmos is your thing—and you've got more $100,000 to spend on a car—perhaps it's time to test-drive the new Lexus LS600hL. The latest and most expensive addition to the Lexus line, the flagship LS600hL has been on sale in Japan since May and will begin reaching U.S. dealers in late summer. "Everything about that car is leading-edge technology—it's got to be one of the most technologically advanced machines," says Jim Press, Toyota Motor's (TM) North American chief.

While luxury competitors might question that point—analysts, for instance, reckon Europeans rivals have a technological edge when it comes to braking systems and diesel engines—no one can argue that this new Lexus, which includes dozens of computers, isn't jam-packed with the latest gadgetry.

Under the hood, there's a new 5-liter V8 engine that, thanks to a hybrid system, performs more like a V12, racing from 0 mph to 60 mph in 5.5 seconds, generating 438 horsepower. With fuel economy of 20 miles per gallon in the city and 22 mpg on the highway, it's hardly in Prius territory. But the LS600hL, and the slightly smaller LS600h (which won't be sold in the U.S.), is 70% cleaner than rival cars from the likes of Audi, Mercedes-Benz, and BMW. It's also 25% cleaner than the nonhybrid version of the Lexus LS460.

Trying to Stand Out

What's more, at $126,000 for a fully loaded model in Japan (prices will start at $104,000 in the U.S.), buyers are unlikely to be too ruffled by the hybrid premium—the additional cost necessary to produce the hybrid system that investment bank UBS (UBS) estimates is likely to be more than $7,000 for larger vehicles.

More important, the high-end luxury hybrid brings the Lexus brand some much-needed differentiation in a crowded market. "Lexus needs something that Mercedes-Benz and BMW don't have, and the hybrid system is one of the weapons." says Koichi Sugimoto, an analyst at Merrill Lynch (MER) in Tokyo.

That differentiation is much needed: It might surprise Lexus owners in the U.S., where the Japanese marque is the best-selling luxury line, but in Japan and Europe, Lexus fever has yet to take hold. In Japan, where the brand was only introduced in August, 2005, sales were just over 30,000 last year. That's a less than a tenth of U.S. sales and, estimates Merrill's Sugimoto, 90% of those were former Toyota buyers. In Europe, where sales were 50,700 last year, Lexus was eclipsed by German rivals.

Calling All Technophiles

Toyota also hopes that by adding a higher priced, higher spec Lexus model, it can now compete head to head with the BMW 7 series and Mercedes S-class luxury models. "This is probably the first time that any of Toyota's models has the similar price tag to the top lineups of BMW and Mercedes Benz," says Koji Endo, analyst at Credit Suisse First Boston in Tokyo. "Models such as GS, SC, and IS are all too cheap for the buyers of BMW 7 series and Mercedes-Benz S-class."

The sheer breadth of gadgets inside the flagship model will surely excite technophiles. On the driver's side dashboard, a camera is mounted to monitor his or her face—to assess whether the driver seems drowsy and alert him accordingly to prevent him from falling asleep. A precrash collision system, meanwhile, automatically slows the car down if it detects pedestrians in its path and assists with steering if a collision is imminent.