Daimler Announces Tentative Plan to Launch Series of Luxury Compact Cars in U.S.

Daimler AG is considering launching a series of small Mercedes-Benz cars in the U.S. in a bid to tap Americans' growing interest in downsized models that offer upscale features and finishes, the German automaker's chief executive said.

Under its tentative plan, Mercedes would import by 2012 at least one of four next-generation compact models it will start selling in Europe in late 2011, Daimler CEO Dieter Zetsche said in an interview with The Wall Street Journal (subscription required).

These diminutive Mercedes would go head to head with an expanding field of premium small cars in the U.S., including the A3 from Volkswagen AG's Audi unit and BMW AG's 1 series and Mini Cooper.

Unlike traditional compacts these cars can be costly; the Mini goes for as much as $34,000 depending on options.

Daimler's tentative move comes as buyers in Europe and the U.S. are increasingly redefining what they want in a luxury car. The severe economic downturn has driven even affluent consumers toward smaller and more understated models with higher fuel efficiency.

U.S. sales of large sport-utility vehicles such as the Chevrolet Suburban have plunged, while sales of tiny but stylish subcompacts such as the Honda Motor Co. Fit have grown, the Journal reported.

Analysts attribute some of Daimler's drop in global sales this year to a product mix heavy on large luxury models and light on more modest vehicles, compared to, for example, German rival Audi, whose sales have fallen relatively modestly.

Beyond the recession, premium car makers such as BMW and Daimler are eager not to be on the losing end on what many see as a longer-term shift toward more environmentally friendly luxury cars, as more buyers put a premium on clean technology than on horsepower and flash.

"We believe the future customer will continue to want to show some statement" in the luxury car that he or she drives but "the definition of luxury will be somewhat different," Zetsche said. "It will be fewer CO2 emissions and more modesty in appearance."

Daimler has another motive for introducing small cars, which it already sells in much of the rest of the world: They could help it meet U.S. fuel-economy standards, which are set to tighten in the next few years.

Source: Edmunds

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