Lexus and Mercedes Heat Up SUV Battle at New York Auto Show

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The battle for leadership of the U.S. luxury auto market heated up today as Lexus and Mercedes-Benz debuted new SUVs at the New York International Auto Show.

Lexus introduced a new version of its RX, the brand’s most popular vehicle. Mercedes showed the GLE, a revamped and renamed replacement for the M-Class. Infiniti, an also-ran, is adding to the mix with a revised version of its QX50. The vehicles are commodious, richly appointed and jammed with the latest in driverless technology.

Mercedes and Lexus helped create the hugely profitable category in the late 1990s. Sales of luxury SUVs have soared 67 percent since 2010, when the U.S. auto market began to climb from its recession lows. Mid-sized sport utility vehicles like the RX and GLE make up almost half of the luxury SUV segment and typically generate much fatter margins than other models.

“These are incredibly important vehicles to Lexus and Mercedes,” Michelle Krebs, senior analyst with AutoTrader.com, said in an interview. “That segment has expanded and there is a constant battle among the brands.”

The new RX and GLE are loaded with technology that puts drivers another step down the road to the driverless car -- radar that can detect when a person is near or monitor the vehicle ahead for sudden stops and then brake accordingly. Lexus’s technology package will add $300 and $635 to the sales price.

Sales Race

Toyota Motor Corp. sold 107,490 RXs last year, a 3.4 percent increase over 2013. Mercedes sales of the M-Class rose 13 percent to 46,726. On the strength of the RX, Lexus was No. 1 in the U.S. luxury market for 11 years until 2011, when recalls and natural disasters tripped it up and the Germans seized control. Last year, BMW AG’s namesake brand held off Daimler AG’s Mercedes to recapture the title.

The RX is the most popular vehicle in Lexus’s 26-year history. It’s also the stickiest: 60 percent of RX owners buy another Lexus, compared with about 48 percent for the brand as a whole. The new RX, loaded with the most safety technology of any Lexus, enters one of the hottest segments in the industry, luxury SUVs.

“We’ve got about 1.5 million existing owners out there who are very loyal to us,” Jeff Bracken, U.S. general manager for Lexus, said in an interview. “Those are some really exiting numbers for us.”

Technology Upgrades

The fourth-generation RX has a new front end with Lexus’s signature spindle grille. It also features technology upgrades, including the pedestrian pre-collision warning that uses radar and a camera to detect walkers, as well as vehicles. The system will create a visual and audible alert and, if necessary, brake for you. It also can take over the wheel to steer the car back into the lane and features high beams that will switch on or off depending on oncoming traffic. The new RX goes on sale in the fall.

SUVs are a booming part of the worldwide luxury market, Mark Templin, global head of Lexus, said in an interview.

“Look at the trends: Luxury, globally, will grow faster than the mass market will and within luxury, SUVs will grow faster than everything else,” Templin said. “Crossovers and SUVs will become a bigger portion of luxury globally.”

The RX ranked first among the 16 mid-size premium SUVs that generated about $25.6 billion in revenue last year, according to analysis by TrueCar Inc. The M-Class ranked fourth, trailing Honda Motor Co.’s Acura MDX and the BMW X5, the company said in an e-mail.

While the dollar value of that group’s sales rose 9.7 percent from 2013, revenue from eight premium full-size SUV lines rose 11 percent to $8.52 billion.

‘Things Are Good’

“When things are good the market swings back to SUVs,” Steve Cannon, Mercedes-Benz USA’s chief executive officer, told reporters Tuesday night at a preshow unveiling of the GLE in New York. “In a strong economy, with fuel prices where they are, we know the wind is at our back. The advantage goes to the manufacturers and the brands that have the product.”

Compared with M-Class models such as the ML350, the GLE has a revamped front and back end and is available as a plug-in hybrid, a first for a Mercedes SUV. Its technology package also includes the ability to help avoid accidents, either by warning, helping or taking over for the driver. Mercedes has sold about

1.6 million of the GLE’s predecessors since its 1997 debut.

“2015 is going to be a great year for SUVs,” Cannon said. “It’s going to be a feeding frenzy.”

Nissan Motor Co.’s new Infiniti QX50 is 4.5 inches (11 centimeters) longer, providing more legroom for rear-seat passengers. Available technology includes forward-collision warning and lane-departure prevention. Sales of the QX50, which replaced the EX model, rose 26 percent last year to 2,727.

“RX still has a target on its back,” said Jeff Schuster, an analyst with LMC Automotive. But he expects Lexus to remain No. 1 in luxury SUVs. “Lexus helped create this segment and it’s still the major player by far. We’d expect that to continue.”

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