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As BMW and Mercedes-Benz fight it out for this year's sales crown, the "luxury market" has never been so competitive.

Dennis DesRosiers calls it "a good fight" and it's hard to argue with him.

The luxury car makers in Canada, the premium brands, are in a bitter struggle for No. 1 - first in sales, that is. It's a crown BMW has held for several years now and holding onto it has been a priority for BMW Canada president and CEO Franz Jung. Like Nike the sportswear maker, Jung clearly believes that second place is for the first loser and that's not where he wants to be.

But even though it may stick in his craw, he may have to settle for No. 2 this year. Arch-rival Mercedes-Benz, which barely lost out on winning the sales crown in 2009 (by just a few hundred units to BMW) has been steadily building a lead this year.

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So far, the Mercedes brand has out-sold the BMW brand by 1,943 vehicles (11,901 versus 9,958). That's not to say BMW sales are sagging. On the contrary, BMW brand sales are up 18.7 per cent through May. But at Mercedes, brand sales on the year are up 26.8 per cent.

DesRosiers argues that in the punch-up for No. 1, profits might be in jeopardy. After all, the premium market is rich in sales sweeteners and other supports designed to move the metal. Perhaps they may even be at historically high levels.

BMW and Mercedes-Benz are not alone in offering cash-rebate incentives and low-interest finance and lease rates. Other premium brands have been busy here, too. And buyers who do their homework will also find certain premium models loaded up with free automatic transmissions and other goodies and features. Some captive finance companies have been known to support sales with strong residual values that do much to lower the monthly payment for lessees, too.

All this is great for buyers, but wheeling and dealing in the car business has the potential to slice into revenue and profits.

"No, not in our case; we are very profitable," says Marcus Breitschwerdt, Mercedes-Benz Canada president and CEO, in an emphatic rebuttal to DesRosiers, who has suggested that both German car makers are dragging most of the other luxury brands "down rate hole after rate hole in search of volume."

Breitschwerdt takes great offence at that suggestion. His view is that the Canadian premium market is growing as it should and Mercedes is simply best positioned with its new models to grab the lion's share of growth.

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Regardless, from the sidelines, the luxury car war going on in Canada makes for a great spectacle. Unless you're a shareholder, who cares if record sales translate into a highly profitable bottom line for any of these car companies?

Martin Sander, president of Audi Canada, insists that his company is being selective and very careful about offering sweeteners such as low-interest rate financing. "This is critical," he says. Yet Audi sales are up a whopping 43.1 per cent on the year.

"Audi," argues DesRosiers, "is the luxury marque most loyal to their brand values and it is paying off big time for them."

Audi vehicles are selling primarily on their own merits, Sander insists, without any sort of radical discounting. And it is true that Audi has put very little into the marketplace in terms of obvious cash incentives, subvented (subsidized) leases and cut-rate financing.

Breitschwerdt at Mercedes argues that his company's success stems from having the right product for Canada - which he likens to a sort of hybrid market existing in a space between Europe and the United States. Canada, in fact, is more European in many ways and that's why the B-Class crossover is sold here, but not in the United States. It's also why the Smart brand was launched here before moving into the United States.

"The B-Class, first in North America. Smart, first in North America. We've introduced smaller engines, we have our own all-wheel-drive strategy and there are our diesels which have been right for Canadians. That is why we are strong in Canada; we have a wide variety of offerings," he says.

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Nonetheless, in the mano-a-mano world of the automobile business, the Nike philosophy rules. Winning matters. It matters a lot.

"Our consumers want to buy success," Jung has said. "If we're not No. 1 or No. 2 we are not seen as so successful in the eyes of our consumers."

Oh, yes. Put a group of car company CEOs together and the smell of testosterone fills the air. Pit BMW against Mercedes-Benz and you not only have a struggle between luxury car companies, but something of a cultural war between the Bavarians of BMW and Swabians of Mercedes.

What does this all mean for consumers? Better deals.

Take the BMW X3 crossover. BMW revamped it for 2010, lowering the price and introducing new derivatives. It's a strong model, yet as of June 1, BMW Canada slapped on a $1,000 cash incentive that is scheduled to run through July 4.

Meantime, Mercedes-Benz Canada has been supporting its vehicles with residual values as high as 60 per cent in some cases - with high residuals having the effect of lowering the monthly lease payment. As for cash incentives, if you like the grand S-Class flagship Mercedes, the company has a $12,500 factory-to-dealer rebate for cash purchases only.

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These are just a few of the eye-grabbing offers available.

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