DETROIT German luxury car brand Mercedes-Benz unveiled a small sports utility vehicle (SUV) on Saturday to pursue a profitable niche market as more carmakers target upgrades in off-road models for urban drivers.
The Mercedes Vision GLK Freeside is a concept car. But a vehicle similar to it will be launched in Europe in 2008 and in the United States in 2009, as automakers say growth potential remains in such niche segments even when overall car sales may be flat or lower if consumer spending slows.
Mercedes also thinks the GLK could allow give it an edge on bigger premium carmaker BMW with its X3 model.
"This model is the most important model for the new year," Dieter Zetsche, Daimler board chairman and head of Mercedes-Benz Cars, told reporters at the unveiling on the eve of the annual North American International Auto Show here.
The GLK Freeside is small for a SUV at 4.52 meters length but boasts luxury features with off-road engineering: a Bluetec 4-cylinder engine, a 7-speed automatic transmission and 4Matic all-wheel drive.
"It's a relatively important model, since until now it's been left for BMW with its X3 and now Volkswagen has joined the competition with its Tiguan," said UniCredit analyst Georg Stuerzer. "Moreover, the segment is one of the few in America and Europe that is currently growing."
He expects the strength of Mercedes' brand name will ensure the model will be a success with about 80,000 in unit sales in its first 12 months of production.
In 2007, Mercedes SUV sales rose 6 percent to 180,100 units from 169,500 in 2006. Overall Mercedes car sales rose 3.2 percent, while sales of the extra large GL Mercedes car class rose 70 percent to 40,200 units.
Zetsche told reporters on Saturday that Mercedes is sticking with its profit target of 10 percent return on sales or gross profit for 2010.
"We know that it's an ambitious but attainable goal," Zetsche said.
Mercedes ROS target for 2007 was more than eight percent.
Mercedes has been active in the SUV market for over 25 years with the G-Class model. It makes the GL SUV in Alabama.
The SUV as a type began with off-highway vehicles that harked back to World War Two military transports such as Chrysler's Jeep or Ford's Land Rover. Luxury versions eventually appeared to appeal to wealthier city dwellers.
(Additional reporting by Christiaan Hetzner in Frankfurt, Editing by Peter Bohan)