12 minute read
PREMIUM POST-COVID
STYLING IT OUT
AFM Lexus’ Carlos Montenegro talks to T&FME on guiding the premium brand through a pandemic
Lexus is the go-to choice for limousine fleets in the UAE wanting an alternative to other premium tier brands in the market. Featuring all the trappings you would expect for a blue ribbon brand, plus the Middle East conditions reliability you would expect from a marque associated with Toyota, Lexus’ exclusive UAE partner Al Futtaim Motors (AFM) holds an enviable position in the market, managing director Carlos Montenegro explains to T&FME.
“Obviously, the Al Futtaim family has almost forever been the sole distributor of Toyota!” He jokes. “30 years ago, they also agreed to take the Lexus brand and since then, there’s been a terrific job done in the market. Lexus is the number one premium brand in this market and in 2019 it was recognised as the second most recognised brand in the country.”
Montengro is sitting with T&FME minutes after chairing a meeting where the brands burgeoning 2021 line-up was presented to the AFM team.
The end of 2020, saw a flurry of new car announcements, including refreshes for the LX luxury SUV and the all-important LS, its flagship sedan. After a challenging year for the automotive trade in the UAE, he says the company is excited about the opportunities that lie ahead for the brand. Its storied reliability will be a major strength in the postCOVID climate. He predicts the brand can continue to serve its trusting UAE national drivers which make up the majority of its customers while penetrating further into an expat market looking for premium models.
“Our customer portfolio is 80% Emiratibased. Lexus has built its whole reputation in this market thanks to the strong reliability of the cars, plus the features and performance – that’s also brought a tremendous residual value in the car especially in the aftermarket,” he remarks. “Overall, Lexus has managed to get a very strong brand with prestigious cars that are reliable.”
Beyond the cars themselves, he says the UAE remains a benchmark for the Lexus globally in terms of how to treat its customers: “We are known for our hospitality. The UAE is the model worldwide”.
The fleet market in the UAE is focused on leasing and rental options for customers as well as limousine services. Montenegro says that reliability is once again the brand’s strength in the sector, particularly with fleets operating in the latter segment.
“When Careem and Uber merged they decided the most reliable car for the limousine service was the Lexus ES (executive saloon),” he enthuses. “We actually have a 100% of that segment because of the reliability of the car – those cars easily make a million kilometres before they are
BUILDING ON FROM A POSITION OF STRENGTH
Carlos Montenegro says Lexus enjoys a leading position with UAE nationals. Much of the focus will be to retain their loyalty while tapping into the expat market.
renewed - and also the TCO (total cost of ownership). We are also adding to the fleet the hybrid version. These have been key factors for us to be leaders in the segment.”
Montenegro says that Lexus is consequently present in all the fleets of leading companies in the market and in many rental fleets in the market.
As you would expect, many of those are in the hospitality and hotels sectors – many of whom are almost literally at the high end of the market: “We are present in many high-end services like private jet firms where do you know those limo services up to the super high-end customers,” he adds.
Talking of customers at the high-end, Al-Futtaim Lexus launched a limitededition gold version of its LX 570 2021 at the start of the year which will be available to an exclusive pool of UAE drivers to own. The LX 570 is described as a powerful and aggressive model, “handling the most extreme driving conditions effortlessly taking customers from tackling off road trails during the day to become the showstopper when pulling up outside a red-carpet event at night”. It is the sort of vehicle people associate with desert glamour escapism of the UAE.
“The Lexus LX 570 is especially very much used also by the leaders of the government, such as Sheikh Mohammed’s office and all of the Sheikh offices in the rest of the Emirates. It’s a very prestigious car within the government sector.”
For fleet buyers in the UAE, Montenegro argues that the cost of fuel is an important consideration despite its still relatively cheap pricing to other markets. When your vehicle does a million kilometres the dirhams and fils count for Lexus customers.
RELIABILITY AND REPUTATION
Carloe Montenegro says that reliability is the brand’s strength in the premium sector, particularly with fleets.
2021 LINE-UP: A NEW LEXUS IS
The latest version of the popular vehicle remains true to its foundation as a frontengine, rear-wheel-drive sports sedan, while expanding on the qualities that have built its loyal following across the UAE.
“When you go in to people that make a lot of kilometres, they own sedans: the Lexus ES, EX and the hybrids,” he says. “For them TCO makes a difference. Even though the petrol here is not expensive compared to, say, Europe you do easily get a reduction in the cost of your fuel because of the high kilometres these people do.”
Stressing that this help creates a compelling case for fleets when considering Lexus, he says that the vehicles are holding onto competitive residual values helping boost the overall TCO for fleets which must factor in selling the vehicle down the line.
“Residual value makes a tremendous difference,” Montenegro adds. “After three or four years, the cars are valued higher than all of our competitors. Plus, as you may know, Dubai and UAE is a big hub to export to other markets: The Lexus brand is also very much appreciated in the Gulf market and Africa.”
The leasing market is becoming an increasingly influential part of the UAE market. For years, it represented 5% of the total sales in the vehicle but, Montenegro says this is changing and heading upwards; although currently well-short of the 40% you would expect in a European car market, for instance.
“It’s been underutilised here but now it’s booming,” says Montenegro, adding that fleets are moving away from a simple strategy of purchasing before then dumping vehicles into the market when they need to de-fleet. New strategies are evolving to ensure that they are sold earlier, while still holding a high value and turn an ageing fleet into a useful source of income.
With leasing much more attractive to customers, a new market is emerging;
LINE-UP 2021: THE EXCLUSIVE LX570
Al-Futtaim Lexus is introducing a limited-edition gold version of its flagship segment-leading LX570 2021 which will be available for an “exclusive pool of UAE customers to own”.
Careem and Uber decided the most reliable limo was the Lexus ES”
some fleets are also tapping into demand for longer term arrangements that makes attaining premium vehicles much easier for drivers without having to be committed to purchasing them out-right.
“There are several big operators now. AFM handles Hertz and they have the rental arm but they now also have a leasing arm. It is almost becoming the same to what you might find in Europe: where the cars are held for two or three years then defleeted and resold either locally or through traders. I think many of them go into private ownership with many of them going into auctions.”
While he sees change in the fleet leasing and rental market, he argues that beyond the UAE it remains underdeveloped. This can open up re-sale opportunities for AFM and Lexus, he argues.
“When you have a car, or a brand, which has strong residual values, you have the best strategy you can have, right?”
It is perhaps surprising when you talk to Montenegro that he considers the hybrid offerings from Lexus a core part of the strategy going forwards.
“Little-by-little we see a trend, very much supported by the government,
LINE-UP 2021: LEXUS LS – A FLEET FLAGSHIP
Montenegro describes the Lexus LS as its flagship model for limousine fleets in the UAE market.
A GAME-CHANGER
A “game-changing partnership” with Facebook enabled customers in the UAE to explore the entire Lexus range, customise from body to engine, book a test drive, reserve it and pay a deposit, all through their phones without leaving the Facebook newsfeed.
for alternative powertrains; more fuelefficient vehicles. In this part of the world, Lexus is the luxury brand with the most hybrid powertrains. We have now four models currently in the market and our cousins at Toyota also dominate the mainstream brands with hybrids.”
He continues: “What we see are the heavy fleet users really embracing hybrid technology. They are happy to pay extra at the beginning because they know in three or four years times they will see the benefit.”
With hybrid vehicles coming to the fore in only the last couple of years, it is arguably too early to tell whether premium vehicles can retain the residual value and be easy to sell on like their traditional engine peers. For now, Montenegro is happy to draw on the experience of Toyota in the UAE for an indication of where they may head.
“We can look at the Toyota Camry and we have seen that the batteries were lasting and the residual values were up,” he explains, adding: “I guess (resale) will probably be a little bit of what happened in Europe when people could see they were durable and the batteries were not fading away. What we are seeing - while it is true that hybrids are not being exported that tremendously - there are some markets like Jordan where they are in high demand.”
Also expected to be in high demand are tickets for the delayed Expo 2020 Dubai which is anticipated to be one of the first major global events to take place in the wake of the COVID-19 pandemic. Prior to the virus hitting the UAE, AFM Lexus had enjoyed a strong 2019 and he hopes the Expo will be a stepping stone to eat into the market share of its competitors.
“We were expecting 2020 to be a very good year and it was not the case and I think the limousines was one of the most affected segments,” he explains. “People actually stopped renewing cars. We have some ideas and concepts ready for 2021 and we expect that those limousine companies will return with the traffic from tourists and businessmen for the Expo and other events. And, of course, all the time, the cars are getting older even if they’re not being utilised in the same way. There is still that need for fleet renewal.”
Looking back on the events of the last year, Montenegro is proud of the way his staff at Al Futtaim and how Lexus adapted quickly.
“The good thing is that our factories
A GAMECHANGER FOR 2021
Al-Futtaim Lexus, the exclusive distributor of Lexus in the UAE, is ramping up its customer approach in order to cater to new behavioural norms and higher expectations from automotive customers in 2021.
The global pandemic and lockdown in 2020 catalysed an evolution in consumer behaviour as consumers adjusted to a new contactless way of living and working, including automobile purchases. This resulted in lasting changes in automotive consumers’ priorities and demands, the most pertinent of these being a heightened focus on safety, and demand for more value.
Al-Futtaim Lexus has built safety into the customer experience, offering an online journey that not only allows customers to stay home, but also elevates the customers’ experience pre, during and post purchase. Online services such as vehicle purchase, a vehicle visualiser with 360 views for a fully interactive experience, at-home test drives, and a carefully re-designed website, bring the showroom experience to the customer.
A game-changing partnership with Facebook enabled customers in the UAE to explore the entire Lexus range, customise from body to engine, book a test drive, reserve it and pay a deposit, all through their phones without leaving the Facebook newsfeed. Digital innovation and expansion of home delivery options are a cornerstone of the company’s 2021 strategy. The heightened focus on safety also impacted the ‘car sharing’ trend that had gained momentum in 2019, with an increasing number of hourly or minute rentals and ride-sharing options. The danger of the pandemic and social distancing norms shifted the emphasis back to personal vehicle ownership, which is likely to stay throughout 2021 or until the threat of the pandemic has passed.
The second major consumer behavioural trend that Lexus predicts is customers’ demand for the best value. Continuing its passion for brave design, imaginative technology and exhilarating performance, Lexus’ retail offering is expected to look very different in 2021. Customers have a lot to look forward to, including new models, brand partnerships and showroom activations that will create memorable experiences for customers and deliver the incremental value that they are looking for in a postCOVID era.
are extremely flexible. Japan stopped were not flooded with need vehicles, we wouldn’t be able to sell later. Our stock was actually quite lean through the whole thing.”
He adds that the company was able to accelerate plans for online that may have been on the sidelines in a typical year. A partnership with Facebook that offers a range of customising, servicing and purchasing options through their phones is typical of the new approach.
“We were able to do what we do in three years, in just 15 days – things like developing
the customer journey online,” he says. “You need to have a proper online presence but at the same time, people in this part of the world still want to come to the showroom and negotiate. Getting those two things right is a big part of what we are focusing on.
“For 2021, we expect a recovery because there are very good things happening in the market with the Expo on. The recovery might not take us to the level of 2019, but the UAE is expected to be the market that recovers faster than anywhere in the world. We expect a decent year for 2021.”
