Mercedes-Benz will add a convertible and diesel- and hybrid-powered sedans to its C-class lineup after the car is redesigned next year.
The current C class is offered only as a sedan and coupe and only with gasoline engines. On its rival 3 series, BMW offers coupe, convertible, station wagon, diesel and hybrid versions.
"We were fighting the 3 series with two arms tied behind our back, and now we will change that," Mercedes-Benz USA CEO Steve Cannon said in an interview.
The redesigned, U.S.-built C-class sedan will go on sale in August 2014 after debuting at the Detroit auto show in January.
BMW has long been the leader in the small luxury segment, but Mercedes began to cut into the margin when it brought out a C-class coupe in the fall of 2011.
When only sedans are counted, the gap between the C class and 3 series is small. Mercedes sold 70,493 C-class sedans last year, compared with 75,183 3-series sedan sales. But when all of BMW's variants are added, the 3 series outsold the C class 99,602 to 81,697.
The gap between the arch rivals was significantly bigger in 2010: 100,910 3 series, compared with 58,785 C-class units.
BMW's 3-series sedan was redesigned for the 2013 model year. The coupe and convertible will renamed the 4 series when they are redesigned for the 2014 model year.
The new C-class sedan will be followed by a redesigned coupe in early 2015. The convertible also is scheduled to go on sale in 2015. That will be followed by diesel and hybrid models and an all-wheel drive option. Cannon did not say when those models will arrive, but a spokesman said the hybrid will debut in 2015.
The redesigned C-class station wagon will not be sold in the United States because of low anticipated demand, said Cannon. Mercedes has not offered a wagon version of the C class for more then a decade.
The redesigned C-class exterior will be changed significantly, Cannon said. Spy photos show a car that keeps its wedge shape but has crisper and sharper lines.
Mercedes-Benz will not add crossover variants to the C class lineup. Cannon called vehicles such as the BMW 3-series GT, a crossover that arrives next year, "an answer to product question that no one is asking for."
"We would rather not do that," he said. "Rather than offering a station wagon, we clearly know that SUVs and light trucks are the way to go."
Mercedes-Benz does not plan to offer a C-class version with less content to compete with the $33,445 BMW 320i sedan that goes on sale this month. That's mainly because the C class no longer will be Mercedes' entry-level car in the United States after the fwd compact CLA sedan goes on sale in September.
Mercedes' factory in Tuscaloosa, Ala., is being expanded to produce the C-class sedan for North America starting next year. C-class capacity for North America will be at least 100,000 units annually, Cannon said.
For the first time, the C class will be powered by an engine built in the United States. Parent company Daimler and Nissan will produce four-cylinder Mercedes-Benz engines jointly at Nissan's plant in Dechard, Tenn., starting in 2014.
Cannon said only the 2.0-liter turbocharged variant will be used in the C class for the United States.