In September, Daimler's (NASDAQOTH:DDAIF) Mercedes-Benz will unveil its brand-new GLA SUV, and next year, it'll go head-to-head with BMW's (NASDAQOTH:BAMXF) X1. Considering the luxury compact SUV segment is booming, the growth potential for the GLA is substantial. Consequently, this move could make Mercedes a ton of money. This of course, leads to the question: Which small luxury SUV is the best, and which one will win the battle for your dollar?
BMW has pointedly not called the X1 a wagon, although it may be tempting to argue the point based on its dimensions. At just over 14.7 feet long, and 5.06 feet high, the X1 is BMW's smallest SUV. There are a number of engine options for the X1, but the base, which has a starting MSRP of $30,800, is the sDrive28i. Powered by a turbocharged 2.0-liter inline four-cylinder engine that produces 240 hp and 260 pound-feet of torque, the X1 can go 0-60 in 6.2 seconds, has an EPA-estimated fuel economy of 23 mpg city/34 mpg hwy/27 mpg combined, and sports a drag coefficient, or Cd, of 0.33.
BMW unveiled the X1 concept in 2008 at the Paris Auto Show and started European production on it in 2009. In fact, the X1 sold so well in Europe that BMW had to push back the U.S. debut to last year. Further, the X1 continues to perform well. According to BMW's latest press release, worldwide sales of the X1 totaled 11,732 vehicles. That's an increase from 10,423 for the same time last year, or 12.6%. And Good Car Bad Car stated: "With assistance from the X1, BMW SAV volume rose 47% in July 2013. Excluding the X1, which wasn't on sale a year ago, BMW X models sales rose 3% in the United States last month." Clearly, this compact segment has attractive potential.
The GLA won't go on sale in the U.S. until fall 2014, but here's what we know: It'll look similar to the concept, and at 14.5 feet long and just under 5 feet high, the GLA is another vehicle that could be designated a "wagon" but that Mercedes calls an SUV. It's also taking the GLK's place as Mercedes smallest SUV. So far, the GLA has one engine option for U.S. sales (there are more engine options available in Europe) -- a direct-injection turbocharged 2.0-liter four-cylinder engine that produces 208 horsepower and 258 pound-feet of torque, which can propel the GLA from 0-60 in 6.4 seconds. While fuel economy hasn't been released, the GLA has a Cd value of 0.29, which means it's the most streamlined SUV available, according to Mercedes.
Mercedes hasn't released pricing for the GLA, but an educated guess by Automotive News puts it around $32,000. At this price the GLA, like Mercedes' CLA model, has a lower entry point, which should help attract younger buyers. More pointedly, Mercedes said the GLA, like the CLA, is aiming at conquest buyers, or buyers who are new to the Mercedes brand. Further, Mercedes said, "The sales figures amply demonstrate how well the new compact models are received by customers: In the first half of 2013, for example, 173,362 units of the A and B‑Class and the new CLA Coupe were delivered worldwide (+58%). Especially gratifying is the high conquest rate of the new A-Class: around 50 percent of the buyers in Europe come from other brands." Considering Edmunds called the GLA "Essentially an A-Class with better ground clearance and a straighter roof line," this is great news.
What to watch
For the first seven months of 2013, SUV and crossover sales rose 12% compared to the same time last year. That's in comparison to car sales, which rose 6%, and overall vehicle sales, which rose 8%. Obviously, the SUV/crossover segment of the auto industry is growing, which means profits for auto manufactures. Currently, if you want what Edmunds considers a "luxury compact SUV," the choices are the X1, Tata Motors Limited (NYSE:TTM) Range Rover Evoque , which in July sold 953 units -- an increase of 53.3% from the same time last year, and General Motors' (NYSE:GM) Buick Encore, which sold 3,098 units in July -- an increase of 13.8% from the same time last year.
Next year, however, Mercedes is moving into the "luxury compact SUV" market with its GLA. Based on what I've outlined here and what the GLA is rumored to look like, my personal preference is for the GLA. Thus, for me, I'd say it's the best. But only time will tell if I'm right. Regardless, the GLA could make Mercedes, and its investors, a pretty penny. Thus, this is something I'll be watching closely, and I'll report back as updates come.
Fool contributor Katie Spence has no position in any stocks mentioned. Follow her on Twitter: @TMFKSpence. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.