Toyota's Problems and Aggressive Pricing by Mercedes Fueled Lexus Market Share Losses

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October 15, 2010; Tim Higgins writing for Bloomberg Businessweek reported that Jennifer Haisha, of West Bloomfield, Mich., gave up her Infiniti two years ago for a black Mercedes E-Class with a monthly lease of only $416. "My payments were unbelievable," says Haisha, 57, who works in retail. "I compared them to the [Cadillac] CTS and other cars. [Mercedes] gave me the best deal."

Haisha's good fortune is bad news for Lexus, the luxury car leader in the U.S. since 2000. Lexus has been tarnished by a string of much-publicized quality problems at its parent, Toyota Motor (TM). That's helped pull the brand's growth rate below the industry average, allowing German rivals Mercedes-Benz, a unit of Daimler (DAI), and BMW to gain ground, and—just maybe—grab the American luxury car sales crown.

Mercedes, after selling more vehicles than Lexus in the U.S. in September, finished the third quarter only about 2,700 sales shy of overtaking the Japanese brand. "The aspiration to own a Lexus has diminished, the aspiration to own a Mercedes has increased," says Art Spinella, president of CNW Marketing Research, which surveys customers.

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