Mercedes and Lexus locked in race for No. 1
In a dogfight that could help consumers get some of the best deals in years, Mercedes-Benz and Lexus are neck and neck in the race to be the top seller of luxury vehicles in America.
For the first time in a decade, Mercedes-Benz is close to toppling Lexus for the bragging rights. But with two months of sales left, Lexus isn’t ready to give up the title. That has set the stage for what is expected to be an all-out fight with both brands pouring on the advertising and offering year-end deals.
“It will be a photo finish,” said Jesse Toprak, an analyst with auto information company Truecar Inc. And that means that shoppers can expect “some unparalleled deals for the remainder of this year.”
Through the first 10 months of the year, Mercedes-Benz has sold more than 184,000 vehicles in the U.S., about 1,000 more than Lexus, according to Autodata Corp. But Lexus has been closing the gap in recent months. BMW is about 7,000 vehicles back.
This is the closest the top-selling luxury brands have been in recent memory. Mercedes fell just a few hundred vehicles short of Lexus in 2000 and BMW nearly upended Lexus in 2002.
“Anytime there is a close race it stimulates the whole market. You can expect to see a buyer’s market for the next 60 days,” said Brian Smith, Lexus vice president of sales and dealer development.
Lexus has launched a furious sales campaign. It spent an average of $3,300 per sale on incentives in October, a 267% increase from a year earlier, and an all-time record for the brand, according to Truecar.com. Mercedes spent $3,900 on incentives.
The fight comes against a backdrop of improving auto sales for the luxury market. An improving stock market has encouraged shoppers of premium cars to head back into the showrooms, said Paul Taylor, chief economist at the National Automobile Dealers Assn.
Although the employment and housing markets influence the overall industry, “equities are what really moves the luxury market,” he said.
Luxury auto sales are up more than 13.2% this year compared with a 10.6% gain for the entire industry, according to Autodata.
Toprak believes Mercedes has a good shot at beating Lexus this year. It typically has strong December sales, spurred by an aggressive year-end marketing program. The compact C-Class sedans and the larger E-Class cars are moving briskly this year.
Gene Jackson, a supervisor in the federal Department of Housing and Urban Development in Chicago, is deciding whether to get a Mercedes E-Class, a BMW 535i or a Lexus LS 460 sedan, an upgrade from an aging Acura TSX.
“I drove the Mercedes and loved it. I really liked the ride. If I had to make a decision tomorrow, I would probably buy the Mercedes,” Jackson said. “I like the Lexus too because of the reliability, but it would be more of a cushy ride.”
But not every shopper is jumping to Mercedes.
Helena Lee, a fashion industry consultant from Atlanta, is shopping for a new sport-utility vehicle and rejected the Mercedes ML450 hybrid after a test drive. She’s now deciding between the BMW X5 diesel “because of its sporty feeling” and the Lexus RX 450h crossover hybrid.
“I don’t like how the Lexus looks, but I really like the inside. Everything is easier to find and to touch and to understand,” Lee said. “You can drive thousands of miles with the Lexus with no problems at all, and the price is a little lower.”
Lexus has stayed on top on the strength of its market-leading RX 350 SUV and its ES 350 entry-level luxury sedan. It just launched an advertising campaign pitching how the ES comes with more standard equipment, such as leather seats, compared with its Mercedes counterpart. It also plans a big year-end advertising campaign.
Smaller luxury brands also are likely to play a role in any price war, Toprak said. Audi’s sales are up 22% this year, and it is trying to crack the 100,000 sales mark for the first time. Meanwhile, the Cadillac luxury division of General Motors Co. has shed its also-ran status by becoming the fastest-growing luxury brand this year, helped by new products such as the SRX crossover SUV. Sales are up 40% year to date to 118,406, Autodata reported.
While the big brands are fighting it out, some in the industry are asking whether being No. 1 is a dubious title.
“For the manufacturer it is like the Super Bowl, but we are more concerned about the experience the customer has rather than if we sell one more car than the local Lexus dealership,” said Raymond Burke, general manager of Mercedes-Benz of Long Beach.
The luxury manufacturers like the volume, but they don’t want to be too obvious about getting there, said Rebecca Lindland, a senior analyst at IHS Automotive.
“You always have to be careful to proclaim whether you are best-selling because you lose your exclusivity. It is like seeing your favorite premium brand at T.J. Maxx or Marshalls,” Lindland said.
Yet executive egos always push the companies toward maximum sales, she said.
“The bigger story for us is that we have closed a 75,000-vehicle gap with Lexus and a 40,000 gap with BMW since 2007,” said Steve Cannon, vice president of marketing for Mercedes-Benz USA. “For us to be sitting here at the end of October with the other brands is just amazing.”
The new generation C- and E-Class sedans introduced by Mercedes in recent years, combined with a $1.5-billion investment by dealers to refurbish or rebuild their showrooms to become competitive with rival luxury makes, has helped sales, Cannon said.
Although he would love Mercedes to finish as the top luxury seller this year, Cannon said the company isn’t going to ramp up production or start offering a ton of money-losing incentives just to get there.
“Chasing to be No. 1 has led to bad behaviors that have gotten other manufacturers in trouble,” he said.
If Mercedes wins, it will be by a technicality, said Smith, the Lexus executive. The Mercedes numbers include sales of about 5,000 Sprinter Cargo Vans, and if those are excluded, Lexus leads Mercedes by a few thousand vehicles, he said.
Nonetheless, Smith acknowledged that this has not been a banner year for the brand. Its sales gains are smaller than for the other large luxury names, and Lexus has battled “head winds from the recalls” of millions of Toyota vehicles for sticking gas pedals, faulty floor mats and electronic and software issues.
Lexus dealers remain upbeat and believe they will hold on to the title.
“It is going to be a dogfight, but I think Lexus will win it,” said Mike Sullivan, who owns Lexus Santa Monica. “Historically, we have a real strong December and Lexus isn’t going to give up 10 years of leadership easily.”
