Doubling Lexus Sales Can Result In A 10% Upside For Toyota

-12.26%
Downside
239
Market
209
Trefis
TM: Toyota Motor logo
TM
Toyota Motor

We have written in the past about how important it is for an auto company to maintain a successful luxury car brand. Toyota Motors (NYSE:TM) operates an extremely successful one in Lexus. It is one of the best selling brands in the biggest luxury car market—the U.S. Currently, according to our estimates, the brand makes up around 12.5% of the company’s valuation. This is despite the fact it makes up only 6.5% of the company’s overall vehicle sales. Moreover, vehicle sales have been growing fast over the last five year period. They’ve grown from just over 400 million to over 650 million, implying a growth of close to 62.5% over the period.

According to our estimates, if the brand can double its sales over the next five year period, i.e. increase from 650 million in 2015 to over 1300 million by the end of 2020, at the current price trends, it can result in an over 10% upside for the company, increasing Lexus’ contribution of the overall value from 12.5% currently to close to 21% by the end of the period.

lexus valuation

 

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Toyota Motor

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