Another month sees yet another global ranking of top automotive brands, this time from Millward Brown Optimor, a subsidiary of advertising and marketing agency WPP.

The heavy hitters in this sector are Interbrand and Brand Finance, both of whom we’ve spoken to in the past year, and they each pursue a different approach to determining the strength (or power) of a brand. As we’ll see this can make a huge difference to the resulting actions taken by each brand.

SEE: The truth about Ferrari’s brand power.. (feat. David Haigh, Brand Finance).
AND ALSO: The Twelve Most Valuable Automotive Brands of 2012 (feat. Mike Rocha, Interbrand).

The key difference between BrandZ and the other two approaches lie in the way they apportion brand influence. Speaking with Elspeth Cheung, Head of BrandZ Valuation, she quoted the simple formula: Brand Value = Financial Value x Brand Contribution, where Financial Value is the equivalent of Enterprise Value quoted in the previous two approaches.

BrandZ derive this ‘Brand Contribution’ based on interviews with over 150,000 people every year and claim it provides a unique perspective from ‘real people’, rather than the ‘informed estimates’ used by others. Trouble is, those informed estimates have proven to be accurate and unlike BrandZ’s method, take into account a wider set of influences (see adjacent explanation).

In the eight years since the BrandZ report was first published in 2006, Toyota has claimed top spot in the automotive sector six times, and second on two separate occasions.

This year’s report crowns Toyota as the most valuable automotive brand, with Lexus retaining 10th position. BrandZ report a 12% increase in brand value to $24.5bn, while Lexus climbs by just 2% to $3.5bn.

So it looks like another great year for Toyota, but scratch the surface a little and several discrepancies arise.

Firstly, the omission of Ferrari, Porsche and Jaguar all of whom would be ahead of Lexus based on the results of the other rankings. Ferrari were noticeably higher than Lexus when we looked a few months ago ($3.6bn vs $3.1bn), while Porsche showed a BV of $11.2bn and Jaguar $3.8bn.


We were surprised to see Mercedes-Benz shown with an 11% increase in brand value, while BMW shows a decline of -2%. That runs somewhat contrary to reports of Daimler AG’s CEO, Dieter Zetsche, being under pressure after Mercedes’ performance fell behind its competitors in 2012.

Nevertheless, there are still some interesting insights we can learn about Toyota and its luxury brand, Lexus.

Toyota and Lexus – What can we learn?

In an article published on, Robin Headlee, VP at Millward Brown Optimor spoke of Toyota providing “a value proposition that people really want, offering luxury features on an affordable, environmentally conscious car,” but there’s an interesting dichotomy between this and the principles of niche marketing which would suggest that Lexus should be the more powerful brand.

Lexus provide a type of product/service differentiation in the market, over that which Toyota already provides. Naturally there’s a cost to providing this, which Lexus are able to pass on to their customers who perceive the additional value (and a reason for spending a premium with the brand).

Such a value differentiation normally provides a competitive advantage to the brand, which in turn should result in greater shareholder value being created – of which brand value is one component. Lexus should therefore, all things being equal, deliver a higher contribution via its brand than Toyota, whereas according to BrandZ this is not the case.

Elspeth Cheung of Millward Brown Optimor explains, “When we calculate Brand Contribution we take into account the top 2 layers of the Brand Pyramid, namely Bonding and Advantage, which represent the greatest share of wallet for consumers. From our BrandZ data it’s clear that Toyota’s brand equity is stronger than that of Lexus, both at home and abroad.”

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  • BrandZ-Top-Global-Auto-Brands_G3

In the BrandDynamics Pyramid™ the objective is to obtain the widest span of each element. The Pyramid shows the number of consumers who have reached each level, where purchasing loyalty increases at highest levels. Customers are likely to be active advocates of the brand when they form a rational and emotional bond with it.

Toyota and Lexus sell 19 hybrid models and one plug-in hybrid in 80 countries and regions around the world. Between now and the end of 2015, Toyota will introduce 18 new hybrid models and expects global sales of its hybrids to reach at least 1 million units a year during the same period.

While the first-generation Prius kicked this off in July 2000, it wasn’t until Toyota introduced their advanced Hybrid Synergy Drive System that they were able to scale its environmentally conscious proposition across the rest of the range.

The Prius went on to become an inspiration for other car makers, spawning more than 50 hybrid models from brands as diverse as BMW, Porsche and even Ferrari. Meanwhile Lexus, who launched their first luxury hybrid car in 2004, may have suffered from the diluting effect of its parent brand – put simply, offering a hybrid model in the luxury sector is less of a distinctive proposition than it was 2-3 years ago.

While the technology has gone on to delight the average Toyota consumer, buyers of luxury cars are now expecting more. To their credit, the management team at Lexus have already responded, they now offer three types of hybrid system – full, micro and mild – where two of these harvest electrical power and recycle it back into the car’s drive system. They’ve also upped the dynamic capabilities and the emotional (rather than rational) appeal of their cars.

But there’s clearly a challenge to still overcome, as shown by the brand’s modest growth in value (3rd from the bottom of the BV growth ranking) and the considerably lower levels of bonding and advocacy demonstrated by the BrandZ customer data.

Written By

Steve Davies

Steve is an investor, private equity advisor and former Partner at KPMG, PwC and Bain.   Most importantly he's a life-long car enthusiast, mountain biker and active sports enthusiast. He designs and builds technology platforms and is the architect behind Transmission.

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