Daimler AG’s Mercedes-Benz and Bayerische Motoren Werke AG are spending a combined $280 million to improve their Manhattan showrooms as they race to become the top-selling luxury brand in the U.S.

Mercedes is investing $220 million in a new dealership on 11th Avenue between 53rd and 54th Streets that will feature soaring ceilings and changing light colors when it opens in May. Three blocks away, on 57th Street, BMW is spending $60 million to free up floor space, renovate its store’s facade and make the location more environmentally friendly, reported Bloomberg.

Mercedes is leading BMW by less than a thousand sales this year as they work to overtake Toyota Motor Corp’s Lexus as the top-selling luxury brand in the U.S. for the first time in 11 years. Some of both automakers’ best clients are located in Manhattan, said Jesse Toprak, an analyst with TrueCar.com.

“The financial markets are coming back, bonuses are coming back, bankers are doing just fine again,” Toprak, whose firm is based in Santa Monica, California, said in a telephone interview. “Some of the best months historically for both brands had been whenever the bankers get their Christmas bonuses.”

Mercedes sold 53,346 vehicles in the U.S. in the first three months of the year, topping BMW’s 52,617 deliveries. Lexus sold 47,356 light vehicles. Lexus kept the title last year, beating BMW by 9,216 sales. Mercedes finished third.

The results exclude Daimler’s Sprinter vans and Smart cars and BMW’s Mini brand, which aren’t luxury vehicles.

Mercedes’s new U.S. flagship store at 770 11th Ave. replaces the location on 41st Street near the Lincoln Tunnel entrance, according to plans the automaker revealed amid the New York International Auto Show this week.

The new store has five levels, including three underground, and is 330,000 total square feet, which is more than 100,000 square feet larger than the previous location. The site has a helix ramp that allows customers to pull into the basement to drop off their vehicles for servicing.

“It’s not just a dealer facility,” Ernst Lieb, head of Mercedes U.S. operations, said at an event to preview the new space. “It’s more for us. It’s a showpiece.”

The new facility has 20 more work bays than the previous site and a glass-enclosed service area that allows customers to watch technicians work.

The previous dealership serviced an average of 145 cars and trucks a day and sold 3,254 new vehicles last year, making it the third best-selling U.S. Mercedes dealership, Stuttgart, Germany-based Daimler said in a statement. The dealership has more than 30,000 active customers.

The new facility “is a brand statement but it’s also a functioning business, and it’s a profitable business,” said Blair Creed, the dealership’s general manager. “It’s a bit of a laboratory, it’s a bit of an incubator, but it’s also a very good working model of an effective business.”

BMW’s plans in Manhattan include opening a new 69,000- square-foot space for its Mini brand across the street from its 555 W. 57th St. location. The Mini store should be completed late this year, and the renovated BMW space should be done by the end of next year, the Munich-based company said.

BMW Manhattan has 32,000 active customers, including Mini owners, servicing 180 to 200 vehicles a day and selling about 2,400 new vehicles last year, including Mini models, said Jeffrey Falk, who heads the dealership.

Moving Mini will free more space at the showroom, which has 228,000 square feet and hasn’t been renovated since it opened in 1998. The current dealership’s glass pyramid facade will be replaced with a glass wall and specially designed louvers will be added on the building’s exterior to reduce heat and use more daylight.

“It will be a revolutionary change for this facility,” Falk said in an interview. “It will set us on a trajectory for the next decade.”

The long reign of Toyota Motor Corp.’s Lexus atop the U.S. luxury car market is almost certain to come to an end this year, a victim of an aging lineup and production disruptions caused by the March 11 earthquake in Japan, reported The Wall Street Journal.

Shutdowns at Toyota plants in Japan, where all Lexus models except one, the RX 350 sport-utility, are made, threaten its already thin hopes of retaining its crown for the year, concedes Mark Templin, Lexus general manager in North America.

“It will be some time before we see where we stand,” said Mr. Templin. As of early April, he said: “We are right on our sales goals; we are right on our budget.”

In the first three months of the year, Lexus’s U.S. sales declined 4.4 percent, even though overall auto sales rose. Among luxury brands, Lexus slipped to No. 3 for the quarter, behind BMW and Mercedes-Benz.

Toyota’s Japanese plants are due to resume production next week for 10 days, but at about half their normal production level, the company said last week. The auto maker recently warned U.S. dealers there could be “significant” supply shortages in May, June and July, prime U.S. car-buying months.

A tumble to second or third place would mark a key shift in the luxury auto business and underscore the string of misfortunes that have hurt Toyota and weakened its bottom line in the last few years. The decline opens the door for BMW AG, Daimler AG’s Mercedes, Volkswagen AG’s Audi and General Motors Co.’s Cadillac to grab new luxury-vehicle customers, say analysts.

Kurt McNeil, vice president of sales for Cadillac, said Cadillac has gained two percentage points of market share in the luxury crossover segment with its SRX while the Lexus RX 350 has lost a point of share.

“They have been the gorilla in the room in that space, and we have been taking it to them,” said Mr. McNeil. Cadillac sales are up 38 percent this year through March compared to a year ago.

Lexus burst onto the market in 1990, a daring move by a company known for inexpensive and well-made small cars. Few then predicted it would quickly become a fearsome rival to decades-old brands.

After just 10 years, Lexus sped past Mercedes, BMW and Cadillac to become the top selling luxury make in the U.S. It put a halo on Toyota’s overall image, and generated as much as half of its North American profits.

Lexus’s image was hurt last year by the recalls that engulfed Toyota and widely publicized incidents in which certain Toyota and Lexus models seemed to accelerate on their own. One crash that took the life of a California highway patrolman and three members of his family involved a Lexus ES. It was blamed on a floor mat that had depressed the gas pedal.

Troubles for the brand were already brewing before that. Toyota shifted Lexus’s focus from maintaining its leadership position in the U.S. market to establishing the brand in Japan, Europe and China. That distracted management and hurt its momentum in the U.S..

Auto makers often stagger new vehicle introductions to ensure a steady stream of updated models in showrooms. But in its rush into Europe and Japan, Toyota grouped the redesigns of its three best-selling sedans, the IS, ES and LS, in 2006 and 2007. Now those aging models are losing ground to more recently redesigned vehicles from BMW, Mercedes and Audi.

All three German auto makers have fresher large sedans that compete with the LS, the Lexus flagship. For instance, BMW upgraded its 5- and 7-Series in the past two years.

Lexus will show off a prototype at the New York auto show this week that hints at a new, edgier styling for future models.

Meanwhile, new competitors to Lexus have emerged. Hyundai Motor Co.’s Equus luxury sedan, for example, offers the same horsepower as the LS and more standard features such as a navigation system. Yet its entry list price is almost $10,000 under the LS’s.

As recently as 2007, the IS, ES and LS and other Lexus cars made up two-thirds of Lexus’ sales; through March of this year, they account for less than half. This year, sales of those models are down 7 percent.

Kyle Dailey, a 21-year-old student in Boston, recently checked out the Lexus IS 250, but found the car was a bit cramped inside, and didn’t offer the kind of acceleration he prefers. He was also turned off by “the awful plethora” of plastic trim on the interior.

Mr. Dailey found the interior of the BMW 328xi more to his liking, and bought one. “In the most basic of 3 Series you still feel a little pampered,” Mr. Dailey said. “In the Lexus, it was a different story.”

This year Mercedes and BMW have been offering dealers cash incentives aimed in part at taking sales from Lexus. BMW just launched new versions of two of popular models, the 5 Series, a mid-sized sedan, and the X3 small sport-utility vehicle, which competes with Lexus’s top-seller, the RX 350. First-quarter X3 sales more than quadrupled, while RX 350 sales rose 8.3 percent.

This year “is the best chance I’ve had” to gain market share, said Jim O’Donnell, president of BMW’s North American unit.

Daimler AG’s Mercedes-Benz won’t be “stupid” in adding sales incentives to its cars as the company pushes to become the top-selling luxury brand in the U.S., an executive told Bloomberg.

Toyota Motor Corp.’s Lexus brand, helped by customer discounts in October, has remained the No. 1 selling luxury brand in the U.S. this year, a title it has held since 2000. Mercedes and Bayerische Motoren Werke AG’s namesake marque have gained on Lexus with new products as the Japanese brand deals with record recalls.

“December is a big month,” Dietmar Exler, vice president of Mercedes-Benz Financial USA, said in an interview at his office in Farmington Hills, Mich. “There will be some programs, but there will be nothing stupid just to be No. 1.”

Lexus more than doubled average incentive spending from a year earlier to $2,152 per vehicle in October, according to Santa Monica, California-based TrueCar.com. Mercedes increased average incentive spending by 9.4 percent to $4,389 in the month, the researcher said.

Lexus led Stuttgart, Germany-based Daimler’s Mercedes in the U.S. by 5,449 sales through October.

Daimler offered “crazy” lease deals on some models last month, said Jesse Toprak, vice president of industry trends for TrueCar. Leases on the C-Class sedan cost about $300 a month, comparable to deals on Honda Motor Co.’s Accord, he said.

“They are clearly trying to get the luxury sales lead this year,” Toprak said of Mercedes. “Lexus is going to do what it takes to keep that spot, which only means better deals for consumers.”

U.S. sales for this year through October totaled 183,529 for Lexus, 178,080 for Mercedes and 176,736 for Munich-based BMW, the global leader in luxury-vehicle deliveries.

Exler took the helm of Mercedes-Benz Financial in the U.S. in February just as the automaker’s sales began to accelerate. The company has been helped by a move into less expensive luxury categories. Incentives amounts are typically decided by an automaker’s marketing department.

Sales of the C-Class sedan, the only Mercedes with a starting price under $35,000, rose 15 percent this year through October, according to Autodata Corp., a researcher based in Woodcliff Lake, New Jersey.

The average amount financed by Mercedes-Benz Financial for new vehicles is around $50,000, according to the unit. The lower-priced vehicles create greater pressure to reduce costs, Exler said.

In mid-October, the unit introduced a system that allows customers to sign some documents on the screen of an Apple Inc. iPad, allowing for quicker and more accurate service. Mercedes’s 355 U.S. dealers also can use the iPad as a mobile tool in showrooms to access the company’s point-of-sale system.

The finance arm is implementing a fully electronic contract system that will take several years to complete, Exler said. Last year, the company introduced a computer program that validates contracts to catch more errors, reducing the need for staff in that area by more than half, he said.

During the first nine months of the year, the unit found 2,000 errors, which cost about $1,000 each to fix, Exler said.

“You don’t want to call these customers once and say there’s a problem,” he said. “Not a good story.”

DETROIT – BMW AG’s namesake brand increased U.S. sales 1.6 percent in August and beat Toyota Motor Corp.’s Lexus nameplate as the top U.S. luxury brand for the third straight month, reported Bloomberg.

BMW sales rose to 19,540 as deliveries of its 1 series gained 53 percent and the 7 series climbed 42 percent. Lexus deliveries decreased 15 percent to 19,465.

“We are seeing a slowdown in the market and do not expect the second half of the year to be as strong as the first half,” Jim O’Donnell, BMW of North America president, said in a statement. “Despite this, building momentum throughout the year and narrowing the gap with our competitors is still our plan.”

Lexus was one of the few luxury brands to post a sales decline in an overall U.S. market that dropped 21 percent last month. Most of those brands had fallen in August of 2009, when the U.S. cash-for-clunkers incentives spurred sales of small, fuel-efficient cars.

Lexus had record recalls in the past year, including of its LS 460 cars and GX 460 SUVs, and is facing competition from revamped models by BMW and Daimler AG’s Mercedes-Benz. BMW, which beat Lexus in June and July, has set a goal of becoming the best-selling U.S. luxury brand by 2012.

“The new product is just so important for the entire market but especially for the luxury segment where it is much more discerning between old versus new,” said Jessica Caldwell, senior analyst with Edmunds.com, a Santa Monica, Calif.- based provider of industry data.

Mercedes sales increased 15 percent to 19,682 vehicles. The gain was helped by the revamped E-Class, which rose 26 percent for the month and has gained 71 percent for the year through August.

Lexus remains the U.S. luxury sales leader for the year, with 145,490 deliveries through August, an 11 percent increase. Mercedes sales, including Sprinter vans, have gained 22 percent to 144,753, and BMW’s U.S. sales increased 7.8 percent to 139,236 vehicles.