The answer depends on how you define 'better.' But there is one thing that Mercedes has that Lexus will never have: an incredibile heritage of building advance technology cars for more than one hundred years. Separately as Benz and Daimler and then together as Mercedes Benz, these cars have always been at the forefront of automotive technology. Mercedes Benz has a significant racing history as well. Mercedes has been a prestige auto that people have aspired to own for all of the 20th century and into the 21st. Lexus came about as a marketing decision by Toyota in the late 80s to get into the luxury car business. The same thing that Huyandai is doing with its Genesis and its new Equis. This may not be important to most people, but I like it that the philosphy behind which my car was built is based on the visions of two automotive pioneers of the late 19th century.
Drinking a bit of the Koolaid, eh?
Your perception of the prestige was manufactured also. Much of it by the customer base, some by the marketing guys. It's a little different on this side of the world.
It's highly disputable about them being on the forefront of technology.
You speak of the philosophy of the founders, yet look at the massive problems people are having with Mercedes, from new cars, to ones only a few years old, having problems cars should not be getting, especially at those ages. If you're saying the philosophy is half engineering everything, making sure things don't last very long, and high replacement parts and labor costs, then you're 100% correct. Mercedes is excellent for this, living on the reputation they made decades ago.
Also, what about their philosophy between 1939 and 1945?
Really, it's a car, and this is a perfect example of people getting their personal being too tied up in them. They are replaceable, expendable, crashable, and have no souls, like Americans think of things that come out of Germany.
Suffice to say, it would be much better to own a soul-less Toyota than dealing with the haggles of Mercedes ownership, such as dealing with apologists who love and ignore all the massive and expensive problems people have with these cars. Provided they're running at all and Mercedes isn't pretending the problems don't exist.
Who cares what they're doing and how and how Toyota made a luxury brand. I'm not the hottest about most of the Lexus line, but they did a damn good job on them, and even right off the bat when Mercedes was still using CIS. In fact, even Audi abandoned CIS before Mercedes did.
Technological forefront? Well, throughout the 80's, that was going to the Audi Quattro- fuel injection, all wheel drive, ABS, electronically controlled turbo, digital ignition systems, high specific hp numbers, external wastegate, negative axis steering, locking differentials, aerodynamics, and so forth.
I hardly call Mercedes' usage of Superchargers groundbreaking, either, considering how inefficient they are, and often used as a simple solution to get more power without having to invest in developing the proper camshaft profiles and exhaust layout, as well as the electronics to fully exploit a turbocharger.
At this point, a technological breakthrough for Mercedes would be to make a car that is reliable, doesn't have engine, transmission, electrical, suspension, brake, cooling, and body problems. However, since people keep buying into their olde tyme games and stories and fables, they have no reason to because the customers will keep coming back...again and again and again because they haven't had enough servings of dogshit half-assed engineered cars that last barely ten years without repair costs becoming a down payment on a home.