BMW Winning back Market

BMW, buoyed by a new line of small cars, threatens to end the 8-year reign of Toyota's Lexus as the leading US luxury brand.

BMW topped Lexus in July for the third time in 2008. BMW, the world's largest maker of luxury cars, trails Lexus by 3466 sales after 7 months, erasing 90% of the gap from the start of the year.

The US debut of the 1-Series car in March bolstered BMW's offerings with a model that gets 28 miles per gallon on the highway, blunting the effect of record gasoline prices that are sapping sales of big four-wheel-drives. Lexus has added only a sports car and a 4WD with 400 horsepower, V8 engines.

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"Looking at BMW's line-up with all the gas issues of the day, they may be in better shape than Lexus,'' said Stephanie Brinley, a product researcher with AutoPacific. She said Munich-based BMW may pass Lexus by the end of the year.

A 40% jump in global demand for the 1-Series helped boost last month's worldwide deliveries by 2.2%, BMW said.

The 1-Series generated 7400 US sales through July that the Munich-based carmaker didn't have a year earlier. BMW also is benefiting from a 32% rise in US sales of the Mini compact.

V8 engines

Lexus has this year introduced a redesigned version of its biggest 4WD, the $US74,000 LX570, powered by a 383-horsepower V8 engine, and the $US56,000, 416-horsepower, IS F sports sedan. The brand is suffering its biggest decline since Toyota unveiled it in 1989.

But a BMW title isn't assured. The company is scaling back on leasing programs after being forced to take writedowns on returned leased vehicles. Residual values, the projected worth of a vehicle at the end of a lease, are dropping industry-wide because of waning demand for pick-ups and 4WDs.

BMW also is struggling with the weakest industry-wide demand for new cars in 16 years. The company said this month that it would ensure profitability by reducing the number of vehicles produced for the US market this year by 40,000.

Still, BMW's 8% US sales decline in 2008 has been less severe than the industry's 11% drop and Lexus's 15% slide.

Cadillac, Lincoln

Lexus and General Motors' Cadillac have held the top-luxury-brand title for most of the past seven decades. Ford's Lincoln took the crown from Cadillac in 1998 and ceded it to Mercedes-Benz a year later. Lexus has held it since.

Ms Brinley said BMW had more small cars. The 1-Series starts at $US28,600, and the best-selling 3-Series line begins at around $US32,700 for the 328i. The 3-Series also gets as much as 8.4 litres per 100 kilometres on the highway.
Lexus relied on 4WDs for 39% of its 2007 US sales; BMW's 4WDs accounted for 22% of its volume.

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Lexus has also been among the leaders in quality. It ranked as the most dependable car brand in the US for the 14th consecutive year, according to a study of 3-year-old vehicles released last week by J.D. Power & Associates. BMW ranked 7th.

Enjoying the title

"We definitely have enjoyed having that status'' as the best-selling luxury brand, said Greg Thome, a spokesman for Lexus in Torrance, California. "That is not our number one goal, especially in context of this market.''

In addition to the 1-Series, BMW has introduced a small 4WD called the X6 as well as its M3 series of performance sedans. It also will sell a partially redesigned 3-Series starting in October and introduce two diesel-powered models late this year, said spokesman Tom Plucinsky.

"It is not at all a focus to beat Lexus,'' said Jan Ehlen, a spokesman for BMW North America. "All we are doing right now is trying to maintain profitability in the current market conditions.''

BMW and Lexus may not be affected in the same way by changes in consumer behaviour, said Jim Hall, principal of 2953 Analytics, an automotive market research company in Birmingham, Michigan.

"The brands are getting two different parts of the market,'' Mr Hall said. "BMW has a much younger demographic'' and a broader line-up with several niche, low-volume vehicles for which Lexus doesn't have a competing model, he said.

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Should Lexus cede the crown, it may not be runner-up for long, Mr Hall said. A redesigned RX, the brand's best-selling 4WD, will boost sales after it reaches showrooms early next year, he said.