Strong start for CLA, not enough cars

Mercedes sees crunch until 2nd qtr.

The CLA is broadening the range of Mercedes' owner base.

The new Mercedes-Benz CLA sedan will be in short supply until the second quarter because of hot sales.

"Yeah, inventory is tight," said Steve Cannon, CEO of Mercedes-Benz USA, adding that 2013 sales exceeded expectations. "The fact that we sold faster than we expected is a very good sign."

Dealers will see higher allocations as the year progresses, and the situation is expected to ease in the second quarter, he said.

The CLA's success won't help U.S. dealers get more units because production is tight worldwide, Cannon said.

The CLA went on sale in September, and Mercedes-Benz sold 14,113 in 2013. It is the first in a new segment of European compact luxury vehicles that will be joined by the Audi A3 sedan in April. Mercedes' GLA crossover in September and the BMW Active Tourer crossover in 2015.

Dealers expressed concern about the lean inventory, but there is no massive outcry -- yet.

Mercedes-Benz would not disclose its U.S. CLA targets, but Cannon said the United States can't get a larger share until June at the earliest.

Steve Cannon: "One of our best launches"

"We are working from a global production standpoint to get as much out of the factory as we possibly can," Cannon said. "After the first quarter the pipeline opens up and it gets better in the third quarter. We have a nice increase in a full year of CLA."

The CLA is built at a new Daimler factory in Hungary where capacity is likely to be expanded. Because of the CLA's success, Mercedes-Benz is looking to produce the next generation in North America, possibly in Mexico as part of a joint venture with Nissan. A decision will be made this year.

The new entry-luxury front-wheel-drive compact, priced at $30,825, including shipping, is bringing in buyers on average 11 years younger than the average Mercedes buyer and attracting a broader ethnic group, according to Mercedes and dealers. In a memo sent to dealers, Mercedes-Benz disclosed:

  • The median age of the CLA buyer is 46, compared with 54 for the C class -- previously the entry vehicle -- and 57 for Mercedes-Benz brand overall.
  • The conquest rate is 68 percent, and 9 percent of buyers did not previously own a vehicle.
  • A 2.99 percent loan offer of up to 72 months has been widely accepted by this new demographic and is being utilized at twice the rate of the shorter lease terms available on other Mercedes-Benz models.

Tom Libby, an auto analyst at IHS Automotive in suburban Detroit, said the CLA's price and the Mercedes-Benz badge attract Toyota, Honda and VW owners -- "people who are attracted by the Mercedes-Benz image but could not reach the C-class monthly payment or price."

Libby said that in October, just one month after it went on sale, the CLA had the third-highest volume in the 21-car luxury compact segment, according to R.L. Polk registrations. October sales reflected pent-up demand and advance orders, but sales remained strong in November and December, he said.

According to sales data through October, the CLA cannibalized the C class and the E class to some extent, but that is likely to change when the larger redesigned C-class sedan debuts in September, he said.

According to Karl Brauer, senior analyst for Kelley Blue Book, the CLA transaction price is in the mid-$30,000 range "or at roughly the same price as the outdated C-class generation."

"As the newer and arguably more attractive sedan in this price range, the CLA has an advantage over the stodgier C class. This is clear in the higher residual value and lower incentive spend recorded for the CLA," he said, noting this will change when the new C class goes on sale.

Did Mercedes-Benz push too hard by advertising the car during last year's Super Bowl in February and marketing the CLA aggressively before sales began in September?

Cannon and dealers say no. "We launched the CLA beautifully," Cannon said. "It was one of our best launches in years."

Jay Agresta, chairman of the Mercedes-Benz Dealer Board and owner of Benzel-Busch, a Mercedes-Benz dealership in Englewood, N.J., says the brand had to market hard and early.

"There was an early push which stimulated early and long-term demand for the vehicle," Agresta said. "We needed to do that to position the vehicle properly.

"We are competing in a much larger segment with the near luxury segment, and that requires a bit more voice behind it."

Cannon denied rumors circulating among dealers that cars originally destined for the United States were being diverted to China.

China is getting a good share of the current production because the CLA goes on sale there in the second quarter. It went on sale in Europe in April.

Nick Bunkley contributed to this report.

CLA buyers
Mercedes-Benz is drawing younger, more ethnically diverse buyers.

• 26% of Mercedes-Benz CLA buyers are 35 to 44 years old, compared with 19% for the C class and 21% for the compact luxury segment.

• 11% of CLA buyers are Asian, compared with 8% for the C class and 7% for the segment.

• 12% are Hispanic, compared with 9% for the C class and 8% for the segment.

Source: IHS and Polk data

You can reach Diana T. Kurylko at -- Follow Diana T. on Twitter: @dianakurylko

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