Lexus is introducing negotiation-free dealerships as a way to differentiate its dealer experience in a field where the competition has closed the gap in offering a premium experience, said Jeff Bracken, general manager of Toyota's Lexus luxury division. Bracken announced Wednesday at the Center for Automotive Research Management Briefing Seminars that a dozen handpicked Lexus dealers will start a pilot project where prices for new and used cars as well as parts and service have set prices that are not subject to negotiation Dealers must be willing to let customers walk away if they don't like the set price. Bracken said he expects a dip in sales and share in the short term but that should only last a couple months until customers get used to the new pricing strategy. The idea goes back to a two-day meeting in the winter of 2013 where the company and a small group of dealers acknowledged there are customers who don't like the dealership experience, largely because of the haggling. The concept of negotiation-free pricing is not revolutionary, and Bracken said there is a Toyota dealer in Phoenix who has successfully used it for 12 years with success. "So we know it can be done, even in a highly competitive market." Since General Motors got rid of Saturn, no automotive brand currently adopts the strategy, Bracken said. The dealers involved in the pilot program will meet in October and their employees will receive training from an outside firm. The program will start in the first quarter of 2016 and run all year. It will be evaluated almost weekly. Bracken fully expects it to be successful and roll out to more dealers in 2017. He doubts all 236 dealers will embrace it, but would be happy to see the majority switch to set pricing. Dealers set the price and once it is set, they are not to change it over the course of a sale. Prices can be adjusted periodically but the expectation is they remain unchanged for months at a time. Incentives are applied to the price normally. "The dealer has to be willing to let the customer walk away or word gets out and the model falls apart," Bracken said in an interview. Lexus entered the automotive industry more than 25 years ago with 81 hand selected dealers. Dealers have spent $400 million over the last four years and plan to spend another $800 million over the next three years. The luxury segment is expected to end the year at 2 million, up 8% from 2013, and represent 12% of the U.S. industry. Generation X and Y account for a third of luxury sales now and will become the largest group of luxury buyers by the end of the decade. Lexus has a sales goal of 340,000 vehicles this year and is pacing ahead of that target, Bracken said. But it is in a horse race for the luxury title with BMW and Mercedes-Benz currently ahead of Lexus in year-to-date sales. In 1998, Lexus launched the first luxury crossover SUV, the RX, which has become the bread and butter of the brand. The fourth generation RX was introduced earlier this year at the New York auto show with an aggressive new look and an imposing grille. Bracken said he knows the spindle grille design has been polarizing to some. "But, at the end of the day, the risk is essential for our brand to flourish moving forward." To be more competitive, Lexus decided a few years ago it needed to add performance to its lineup of sedans and SUV's. "And I'm not talking about performance like a Sunday at the ballet. I'm talking about a surge of adrenaline like you'd get trying to out run a grizzly bear on the Alaskan frontier with a salmon in your back pocket... something Lexus really wasn't known for." The brand has added performance or "F Sport" versions of many of its vehicles as well as a a limited run of 2,500 "Crafted Line" special editions of the IS, GS, ES, LS and RX. The new 2015 Lexus NX compact crossover that launched at the end of 2014, adding a performance nameplate. It has a starting price of $35,400 and offers the brand's first turbocharged engine. Bracken said the Lexus IS will add a turbo engine when it launches this month and two more vehicles will be turbocharged by year end as the brand plays catch up to an industry trend of smaller but more powerful engines to improve fuel economy.