Sales Lead of Lexus over Mercedes Grows in U.S. Market

Toyota Motor Corporation announced that sales of its luxury Lexus vehicles rose 31 percent in the U.S. market in May as aggressive incentives widened the automaker’s lead over competitor Mercedes-Benz.

Last month, Lexus sold 22,216 units in the United States, raising its year-to-date sales total to 90,098 cars and trucks, an increase of 23 percent from May 2009. Mercedes-Benz sales increased 23 percent to 18,548 during the month of May and rose 22 percent to 85,405 vehicles sold in 2010, Daimler reported.

The news was not so rosy for BMW AG—sales of the German brand dropped three percent in May to 17,859.

Luxury-vehicle sales fell behind those of the general U.S. auto market as Porsche and Lincoln also experienced sales drops, explained Jessica Caldwell, Edmunds.com’s senior analyst.

Automakers are trying to sell off the present model year’s inventory, thus attracting more buyers looking for a bargain than genuine luxury-vehicle buyers, Caldwell noted.

“We expected Lexus to have a strong month because of its incentive programs,” Caldwell reported yesterday. “The ES and IS both did well. Those buyers are a little more price sensitive.”

Lexus provided reduced-rate auto financing and discount leases to generate the sales spike that surpassed the total U.S. market’s 19-percent rise.

Benz Rolls Back Incentives

The existing incentive programs will be discontinued in June and July as Lexus transitions to a more brand-focused marketing campaign, said Mark Templin, Lexus’ general manager.

“We think the luxury market will grow at a faster rate than the overall market,” Templin added.

Mercedes continued to expand due to the success of its revised E-Class sedan, the sales of which more than doubled to 5,476 units. During the same period, Mercedes reduced its incentives to $2,834 per vehicle, a 54-percent decrease.

The automaker will continue to try to reduce incentives, according to Ernst Lieb, Mercedes-Benz USA’s CEO. Lieb explained that it will be difficult to do so because competitors like Lexus continue to offer aggressive incentives.

Lexus spent $1,656 per vehicle in May on incentives, which is 38 percent more than the same month last year, Edmunds.com reported.

Lexus dealerships have larger gross margins than Benz dealerships, so they have the ability to reduce prices to seal a deal, Lieb explained.

“Lexus is definitely pushing this issue right now,” he commented. “Lexus dealers have higher margins and more flexibility on pricing than dealers at a competitor.”

Lexus does not comment on dealership margins, spokeswoman Alison Takahashi explained. Dealerships have the ability to adjust prices to close a sale, she reported.