According to an interview with Auto Express magazine in November 2011, Koji Sato, deputy chief engineer for product planning said: “We are working on a number of solutions to offer low CO2 emissions and these include a small hybrid.”

At present, the E-Segment hybrid model in the Lexus line-up is the newly-launched GS 450h, with a 3.5-liter V6 gasoline engine, capable of 0-100 km/h (62 mph) acceleration in 5.9 seconds.  However, most luxury sedans sold in the European market need to lower their carbon dioxide emissions in order to lower the annual road, company car and registration tax burden on their purchasers. 

• An example includes the BMW 520d.  It is priced competitively, at £30,030 in the UK (US$47,000), capable of a respectable 0-100 km/h time of 8.1 seconds.  Its combined cycle (EU) fuel economy is a segment leading 4.7 l/100 km (50.0 mpg) and emits 123 g/km of CO2 with the optional 8-speed automatic transmission.
• In comparison, the GS450h is more expensive at £44,615.00 in the UK (US$69,500), and can only achieve 7.7 l/100 km (30.5 mpg) and a higher 179 g/km of CO2 emissions.
• The result for a UK purchaser is that the annual road tax for the BMW 520d is £115 (US$180) less than for a Lexus GS 450h.  Savings for company car usage is even greater, at 18% Company Tax instead of 26% (based on Benefit-In-Kind rates) in the UK.

Lexus needs to make its GS sedan more competitive, not just in Europe but worldwide, as all consumers seek fuel efficiency to cope with the rising cost of fuel.  The brand has to broaden from its high performance-led strategy and embrace smaller, more economical and low emitting powertrain options for its hybrid models. 

• This has already begun with the launch of the smaller CT and HS hybrids, based on the powertrain platform of the Toyota Prius.

Lexus has indicated that it will not expand diesel powertrains to other models.

The brand has only one diesel model in its line-up, the IS 200d in Europe, equipped with the Toyota AD Series 2.2-liter turbocharged diesel engine.  Toyota does not assemble a larger diesel engine, except for the commercial vehicle segments.

It is likely that it will deploy a smaller capacity, four-cylinder gasoline engine to its hybrid platforms to meet the new strategy.

• The Lexus/Toyota hybrid platform is mostly integrated in its transmission modules, involving two electric motors, and can thus be mated to any combustion engine.
• The smallest gasoline engine in the Lexus line-up, in the IS 250, is too powerful to bring about the fuel economy needed by the new strategy.  This is a V6 2.5-liter unit producing 153 kW (208 bhp).
• A likely choice would be a modified 3ZR (four-cylinder 2.0-liter) engine from Toyota, to match the 135 kW (184 bhp) generated by the diesel engine in the BMW 520d. 
• Another candidate is the 1.8-liter Atkinson Cycle engine in the Toyota Prius, but uprated to match the performance required by the Lexus brand.
  The final decision on the new engine will be announced in the summer of 2012, before sales begin for the GS sedan in Europe.

Strategy Analytics has analyzed the decision to pursue an all-hybrid approach to the Lexus’ dilemma and believes the brand has taken the correct course of action.

The reasons are:

• Lexus is experienced in the development of hybrid powertrain technology and is well-known among consumers for it.  Sato said: “Lexus has a strong association with hybrid and we want to continue to develop this.”
• With current hybrid platforms in place, it would be more cost effective to develop less-powerful but more economical hybrids than to develop new diesel models virtually from scratch.
• By widening its hybrid offerings, it can also raise volume in hybrid powertrain production and bring about economies of scale across the hybrid line-up.
• Nitrogen oxide (NOx) emission standards have been tightened in recent mandates, involving the adoption of new emission control strategies for large segment diesel models, such as the injection of AdBlue in the exhaust to meet Euro-6.  Although not as complicated as hybrid powertrains, the fear is that NOx controls would become too severe, and thus too costly, for Lexus to develop on its own.
• If Lexus is unable to develop new diesel powertrains, by sourcing from outside suppliers it would undermine the brand’s reputation and lose control of its powertrain design.
• The volumes required for the new strategy may be limited, given that Lexus is a luxury brand, and may not justify the additional investment needed to develop new diesel powertrains – Infiniti are to source from Mercedes-Benz and the Chrysler 300 features a V6 diesel engine supplied by VM Motori (a joint venture with FIAT and General Motors), but only in limited volumes.
• Away from Europe, the new strategy is relevant in North America where the CAFE fuel economy mandate has got tougher (for 2025) and following the lower uptake of diesel there.
• Diesel powertrains are increasingly being threatened by the development of new, more efficient gasoline powertrains, such as stratified combustion, which would negate any investment in new diesel powertrains.
• Hybrid powertrains are perceived to be more refined and relevant for the Lexus brand than diesel powertrains.
• Zero-emission drive, although for very short distances, can give Lexus the advantage should Chinese and European mandates appear to ban combustion-driven vehicles from city centers, as already seen for motorcycles in Beijing.

While competing luxury brands are already successful with diesel powertrains, this does not mean they should follow the Lexus strategy – It is a problem unique to Lexus, which requires a strategy that is unique to Lexus.

For further information relevant to diesel and hybrid powertrain strategies, please refer to the following products from Strategy Analytics:

EV/HEV Technologies Supply & Fitment Database
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=6729

Hybrid Technologies Legislation/Support
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=6726

Analog Semiconductor To Get Market Boost From HEV/EV Growth
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=6623

Economies of Scale - Driving Affordability In Electric and Hybrid Vehicles
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=6244

Auto Shanghai 2011: Domestic Car Makers Face Tougher Battle Ahead (commentary on the BMW 5-Series plug-in hybrid)
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=6324

Automotive Gas Sensors: Emission Mandates Boost Demand
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5981

Hybrid and Electric Vehicles: OEM Strategies Reviewed
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5365

Sensors for Advanced Powertrains: Efficiency Solutions Drive Demand
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=4435

HCCI: The Single Solution For Combating Both CO2 And NOx (commentary on stratified combustion technologies)
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=3614

Diesel Challenges Hybrids in the US
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=3368

BMW Sets The Pace in Engine Efficiency
http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=3250

From the model launches in 2010, Passive Keyless Entry (PKE) systems are increasingly found in compact models outside Japan.

• Ford in Europe have launched many compact models, such as the Fiesta, with its "Key-Free System".  Ford in North America will follow suit with the MY 2011 Fiesta and MY 2012 Focus.
• The Nissan Juke is a compact SUV assembled in the UK - the Tekna trim level comes with the "Intelligent Key" system. 
• The Volkswagen Golf comes with "KESSY" - the system only activates on the front doors in order to lower cost. 

Evidence of this trend, over the past year, can be seen in the latest Strategy Analytics "Advanced Entry and Start System Supply and Fitment Database": http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5942. This shows that certain OEM and supplier strategies aim to spread the availability of PKE, in the hope of raising volumes and lowering cost through economies of scale. And in assisting cost reductions, suppliers, both at system and at semiconductor level, aim to integrate components and functionality in order to reduce module size.

• TRW launched a module that can combine the RF functionality for a PKE system with that for a Tire Pressure Monitoring System (TPMS).  The latter system is mandated in many markets, thus the module can offer additional functionality at minimal cost.
• Atmel has integrated the immobilizer functions onto the same chip for a PKE system, as well as transceiver ICs integrating remote start and TPMS functions.
• Continental and Kathrein have developed an integrated antenna for all kinds of features, such as radio and navigation, as well as PKE.
• Maxim's MAX1441 touch sensor IC has 5 passive components instead of the 16 used by competitors. 

Furthermore, some RKE designs are using push button engine starts as a base for their PKE designs:

• The MY 2009 Audi A4 has a slot with which the RKE fob is pushed further in to start the engine.  Slots for PKE systems are used when the battery in the fob is depleted.
• Established brands with this kind of RKE system, and can also come with similar PKE systems, include BMW, Mercedes-Benz, Renault, Volvo and the Volkswagen Passat.  Some of these models may have a separate starter button for both RKE and PKE systems.

But despite this, almost all PKE systems are offered as an additional cost option to the consumer and because of its higher cost, few are deployed.

• According to Strategy Analytics, only 8.1 million units of PKE (equating a penetration rate of around 11 percent) are being deployed for 2010.

Forecast data can be found in the "Automotive Electronics System Demand Forecast 2008 to 2017: Q3 Update": http://www.strategyanalytics.com/default.aspx?mod=reportabstractviewer&a0=5815.   Strategy Analytics believes that further cost reductions are needed before PKE can see widespread deployment.

Back in 2007, I did an analysis of the then-new BMW 5-Series sedan, which showed the class-leading efficiency of its 6-cylinder gasoline engines. It can be seen in full here. This showed the significant lead that BMW enjoyed over many of its competitors. Over three years on, I’ve just repeated the analysis of fuel efficiency in automatic transmission E-Segment sedans, which also include the Mercedes E-Class and Audi A6. To compare apples-with-apples, only models on sale in Europe, and thus with a European drive cycle fuel economy figure published, were looked at. The results were perhaps surprising. Gasoline powered models have seen a very modest increase in efficiency, but have seen outputs rise more sharply. The overall unweighted average fuel economy of the models surveyed improved by around 5% from 10.1 to 9.6 l/100km, while power output rose by over 13% from 193 to 219 kW. The story for diesel was somewhat different: the overall average economy of the models surveyed rose improved by over 15%, from 7.3 to 6.2 l/100km. Power outputs were up by less than 8%, from 140 to 150 kW. This is arguably because manufacturers have focused their economy efforts on the models which buyers who care about economy purchase – which are typically the diesels. Gasoline models are more popular in non-European markets, such as the USA, where fuel is cheaper, and where E-Segment sedan buyers have traditionally been far less concerned with fuel economy than performance. My prediction will be that the next 3-4 years will see significant increases in overall gasoline engine efficiency in this segment, with many more 4-cylinder DI forced induction units being used, along with a much wider penetration of stop-start. This will be to meet the demand of those buyers in Europe in this segment who still choose gasoline - but also as a recognition that fuel economy is now firmly on the agenda in the USA and Asia, even for luxury sedan buyers. There's still room for improvement.