German vs. German: Mercedes holding lead over BMWs in L.A., but barely.

Bayerische Motoren Werke AG has overtaken Mercedes-Benz in global sales for the first time in seven years, but local BMW dealers aren't quite ready to break open the champagne.

Sales for the first six months of June show that DaimlerChrysler's Mercedes is still the leader in Los Angeles County--even if the gap between the two automakers, is narrowing significantly.

There were 17,574 Mercedes sold in the first six months of the year in L.A., compared with 16,674 BMWs, a 900-vehicle advantage according to registration data from R.L. Polk & Co. In 2003, there were 34,512 Mercedes sold, compared with 29,543 BMWs, an almost 5,000-vehicle buldge.

"BMW is doing a lot of things better." said Todd Turner, president of automotive research and consulting firm Car Concepts in Thousand Oaks. "Every vehicle they develop is true to BMW's character. Mercedes-Benz has not been as successful in doing that. They have launched vehicles that were compromises to the brand."

Year-to date new vehicle sales at Long Beach BMW in Signal Hill increased 1.6 percent over the first six months of 2003, with SUV sales up 1.8 percent, said General Sales Manager Bob Arvizu. Car sales declined 0.2 percent, while pre-owned vehicle sales grew 8 percent, which in turn led to huge increases in sales at the dealership's service, parts and body shop departments, Arvizu said.

"Sales have been good," said Arvizu. "I can't say it's great, but I'm going to say it's good. There are a lot of available cars, not only here but at all dealers. But the product is tremendous and support with the factory has been really good."

For Mercedes, year-to-date sales in Los Angeles County are down 2.2 percent, said Vinnie Mandzak, sales consultant at Beverly Hills Ltd. Mercedes-Benz. Sales at his dealership have fallen 5.6 percent, while Calstar Motors Inc. in Glendale reports a decline of roughly 10 percent.

Going back to at least 1999, Mercedes has out-sold BMW in this market by about 6,000 to 9,000 cars, according to R.L Polk. Nationally, BMW now outpaces Mercedes, said Jeff Schuster, executive director of global forecasting for J.D. Power and Associates.

"It's a very fierce competition," said Schuster. "They're very competitive in terms of luxury, amenities and the image of the two brands. They're almost used interchangeably when thinking of European luxury."

Another factor creeping into the equation: reliability. J.D. Power's 2004 Vehicle Dependability Study, released in June, showed that Mercedes-Benz owners reported 327 problems per 100 vehicles, tying with middleweight Mitsubishi. BMW owners reported 264 problems per 100 vehicles, slightly below the industry average of 269. Topping the dependability list was Lexus, with 162.

"In the initial quality reports, Mercedes quality has slipped since '98 with the acquisition of Chrysler," said Kevin Tynan, senior automotive analyst at Argus Research in New York. "Chrysler has struggled and has required additional assets and cash infusions to keep the company going and developing new products. It's money that comes away from the Mercedes side, which has hurt."

In addition, Banc of America Securities analyst Ronald Tadross said that Mercedes resale values have not held up, which has been a deterrent for potential customers.

The quality numbers are being watched closely because they can sometimes presage problems down the road. The decline of Cadillac's dominance in the luxury market began with poor results from the J.D. Power survey in the 1980s.

Much of BMW's success has come from both SUV sales and its lineup of lower-priced models (though a Mercedes C Class model has a list price of well under $30,000 and, depending on appointments, is sometimes cheaper than a BMW 325i).

The more affordable price point has meant that BMW buyers are, on average, between five and seven years younger than Mercedes buyers, said Michael Frits, sales manager at Beverly Hills BMW, where overall sales are up 3.6 percent for the year.

"Mercedes only recently started to move down-market and challenge BMW in that entry-level category," said Tynan. "Their challenge is that there's a pretty loyal and entrenched customer base with BMW's 3-Series. The philosophy for BMW was that as the customer basically grows in affluence, they move up to a 5-Series and even a 7-Series."

Actress Carolyn Standish purchased a 3-Series nine years ago and is coming back for her third BMW. After starting with the 328, she purchased a Z3 roadster and is now looking at the Z4. "BMW is a great combination of sexy and reliable," said Standish. "They drive great and they're a lot of fun."

BMW may be trying to attract younger customers--and succeeding.

Saundra Issari, a Beverly Hills resident who is turning 16 in two months, was checking out a red 330Ci with her father last week at Beverly Hills BMW as a possible birthday present. "I've always liked them," said Issari. "It's a strong car, and very reliable."

Issari said she had considered Mercedes but decided the brand was not for her. "I feel BMW is more teenager-y," said Issari. "Mercedes is more for older people."

To attract younger buyers, Mercedes has launched an aggressive price program for its C-Class and is doing a bigger marketing blitz to get younger buyers to look at its vehicles. Some consider it a risky strategy because Mercedes could come across as just another car.

"At what point in time does the Mercedes brand lose its luster and mystique if everyone can afford one?" Turner asked. "Is that a message you really want to be foster? It was a mistake for them. BMW has stayed very true. They're not trying to make sales to all people. That's what Toyota's for."

Despite a less-than-stellar year, Mercedes dealers say they think their fortunes will return with new products.

These include the next generation of its SLK roadster and the new GST, which the automaker calls a "sports tourer." Also in the pipeline is a Smart car, a youth-oriented, economical vehicle that will be priced around $20,000 in the U.S. "It's going to be a cult car like Mini is enjoying now," said Mandzak.

Mike Bishara, general sales manager at Calstar Motors, admits that his dealership is always in competition with BMW or Lexus, but thinks that if BMW sales surpass Mercedes, it will be a short-lived victory. "Next year we have three new models coming out, so we get to take that position back," he said.

Out of Gas?

IT appears the novelty has worn off for the vehicle that has positioned itself "Like nothing else."

Sales for General Motors Corp.'s Hummer fell more than 24 percent in the first six months of the year to 12,827 vehicles, versus 16,975 vehicles in the like year-ago period.

In Los Angeles County, the No. 1 market for Hummers, there were 1,310 sold through June 2004, down from 1,645 in the like year-ago period, according to Power Information Network, an affiliate of J.D. Power and Associates.

"It's a trend vehicle," said Todd Turner, president of Car Concepts, an automotive research and consulting firm in Thousand Oaks. "When the Hummer H2 came out two-and-a-half years ago, our assessment was that it had 18-month legs, and after that period of time, we felt it would be pushing for sales as opposed to having the market pull sales. That seems to be the case. It's the kind of vehicle that, once everyone who wants one has one, it reaches the saturation level very quickly."

At Hummer of West Covina, sales manager Omar Basha said the dealership has seen a slight decline, but moved 34 in June. "We're selling a lot of Hummers," said Basha.

While gas prices have hurt some sport utility vehicle sales, Turner said consumers who are willing to pay $55,000 for a Hummer are less likely to be concerned with paying slightly more at the pump.

One thing that may help stem a sales decline is the arrival of the Hummer H2 sport utility truck, which sells for about $60,000. Two weeks after receiving the vehicles, Hummer of West Covina sold four H2 SUT's said David Duvall, assistant sales manager at Hummer of West Covina. "It already has brought a percentage of people back," he said.

But Hummer, which finished last in J.D. Power and Associates 2004 Initial Quality Study after scoring 173 customer problem reports per 100 vehicles, has to do more than introduce a new vehicle to turn things around, said Turner.

"The biggest thing they've got to do is improve quality," said Turner. "Once that reputation gets out there--and it's getting out there very rapidly--it's very difficult for them to recover from that.