Lexus Slides as Korean Cars Build Dominance in Quality Study (1)

(Bloomberg) -- Toyota Motor Corp.’s Lexus line has slipped below the industry average in a closely watched study of new-car quality, while Korean automakers that only recently supplanted Japanese and German brands gained more momentum.

Lexus -- long considered a stalwart of quality -- ranked 15th out of 32 brands in J.D. Power’s initial quality study, falling from seventh place last year and first as recently as 2012. South Korea’s Kia Motors Corp. took top honors for the second year in a row and affiliate Hyundai Motor Co.’s Genesis brand finished No. 2 in its inaugural year.

The decline for Lexus has been playing out for several years. Once America’s top-selling luxury brand, owners reported 98 problems per 100 vehicles in the first three months of ownership, plagued in part by issues with complicated electronics systems. As competitors led by the Koreans catch up, Lexus is now near the middle of the pack. The industry average for brands improved to a rate of 97 problems, from 105 a year ago.

“Historically, Lexus has been the leading brand in the study,” said Dave Sargent, vice president of global automotive at J.D. Power. “Like everybody else, they’ve had challenges with new technology and they haven’t shown improvement while many others have.”

Korean brands, meanwhile, have been steadily improving. After struggling with a reputation for poor quality in the 1990s, Hyundai Chairman Chung Mong-Koo started studying Toyota and other high-caliber carmakers and put a similar ethos to work with his companies’ vehicles.

Kia secured the top spot for the second year in a row this year with a rate of 72 problems, down from 83 last year. Hyundai’s Genesis placed second with 77 problems, one fewer than third-ranked Porsche. A lower score in the study signifies a higher quality ranking.

“Many people wondered if we could maintain such a lofty position,” Michael Sprague, chief operating officer of Kia’s U.S. sales unit, said in a statement. The back-to-back showings as the industry’s top brand “reflect the exacting standards and craftsmanship our team members instill into every car, crossover and SUV Kia builds.”

Lexus wasn’t the only luxury brand to show a weaker ranking this year. Mass-market brands performed better than premium counterparts for only the third time since 1987, according to J.D. Power.

Luxury brands have one excuse for the falling rankings: They tend to pack their cars with more of the latest electronic gadgets, opening themselves up to additional opportunities for things to go wrong.

More problems pertaining to features, controls and displays were reported than last year, the only category of eight to diminish in latest annual study. Problematic features such as adaptive cruise controls and lane departure warnings are some of the tools that will be key to developing autonomous vehicles.

Luxury cars used to be so much better than mass-market cars when it came to reliable engines, better interior materials and basic quality that those factors offset problems with new electronics features, Sargent said. But these days, bread-and-butter brands like General Motors Co.’s Chevrolet division and Ford Motor Co. are doing so much better that their overall scores have surpassed many expensive brands.

For a look back at the J.D. Power survey for 2016, click here.

The traditional Detroit Three automakers performed better than import brands for the second year in a row and only the third time in the study’s 31-year history. Domestic brands averaged a rate of 93 problems, while import brands had 99.

Ford jumped from 11th place to fourth this year and had 16 fewer problems per 100 vehicles than in 2016. Chevy slipped one spot to seventh, but owners reported a rate of seven fewer problems than last year.

Ranking last was Fiat, with a rate of 163 problems. Fiat Chrysler Automobile NV’s Dodge and Chrysler brands, which share parts with Fiat vehicles, also rank below average. Among the company’s brands, only Ram trucks finished above average.

(Updates with Kia executive’s comment in seventh paragraph.)

--With assistance from Claire Ballentine and John Lippert

To contact the reporter on this story: David Welch in Southfield at dwelch12@bloomberg.net.

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Anne Riley Moffat

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