BMW growth trails Mercedes in tightening luxury car race
By Elisabeth Behrmann
Bayerische Motoren Werke AG (BMW) failed to match the pace of sales growth at Audi and Mercedes-Benz in the third quarter, as the world's biggest maker of luxury vehicles battles to defend its lead.
BMW's auto deliveries rose 5.8 percent to 509,669 vehicles, including Mini and Rolls-Royce models. Daimler AG's Mercedes sales, including the Smart brand, rose 9 percent to 431,000 vehicles on new models like the GLA compact sport-utility vehicle, while Volkswagen AG's Audi, which expanded with the A3 sedan, delivered 429,925 cars, 7.2 percent more than a year ago.
BMW has added models like the 4-Series coupe and the van-like 2-Series Active Tourer to thwart plans by Audi and Mercedes to take the No. 1 spot in luxury cars by the end of the decade. That lead may become tougher to defend as Audi pushes ahead with a program to invest 22 billion euros ($27.5 billion) by 2018 and Mercedes expands with vehicles like the upcoming M-Class coupe. BMW today tempered its car sales outlook for the year.
"We won't boost sales at any price," Chief Financial Officer Friedrich Eichiner said on a conference call with journalists. BMW now expects "solid" sales growth, which translates to mid- to high single-digit gains, instead of "significant" double-digit increases in sales, as it focuses on maintaining profitability, Eichiner said.
BMW shares fell as much as 2.8 percent, the most since Oct. 16, and were down 1.8 percent to 83.73 euros at 12:33 p.m. in Frankfurt.
"Next year, I expect a slight tendency for BMW to lose market share as some models are a little older," said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler.
Profit Gains
Earnings before interest and taxes in the third quarter rose 17 percent to a record for the period of 2.26 billion euros. Vehicle production exceeded deliveries by about 36,200 vehicles in the period as the company ramped up new models like the five-door Mini hatchback and X6 SUV.
"The numbers were supported by a degree of overproduction in the quarter, which would have flattered earnings to a certain degree," said Stuart Pearson, a London-based analyst with Exane BNP Paribas.
BMW's earnings capped a positive quarter for carmakers in Europe, where demand is recovering from a two-decade low reached last year. Audi helped Volkswagen increase operating profit 16 percent to 3.23 billion euros. PSA Peugeot Citroen (UG), the region's second-biggest carmaker, said it expects to reach a goal of generating positive cash flow two years earlier than anticipated. Revenue at Renault SA (RNO), the No. 3 in Europe, rose 6.7 percent to 8.53 billion euros on budget Dacia cars.
Compact SUV
Buoyed by demand for the full-size X5 and new coupe-like X4 SUVs, BMW's automotive profitability beat its two closest rivals. The auto unit, which also makes Mini and Rolls-Royce cars, generated Ebit equivalent to 9.4 percent of sales, improving from a margin of 9 percent a year earlier. That beat the 9.2 percent return on sales at Audi, while Mercedes reported a two-year high profit margin of 8.5 percent.
The company is considering another compact SUV model and plans to double the number of models produced in China to six, Chief Executive Officer Norbert Reithofer said on the conference call. BMW agreed in June to lengthen a vehicle production partnership with Brilliance China Automotive Holdings Ltd. by 10 years, extending it to 2028.
The company expects sales in China, its single biggest market, to climb in the low double-digits next year, Reithofer said. BMW car sales rose 8.4 percent in China in the third quarter, which held back the total increase in the first nine months of the year to 18 percent.
BMW stuck to its forecast for a "significant" increase in 2014 pretax profit from last year's 7.9 billion euros. BMW plans to deliver a record of more than 2 million vehicles this year, even as Mini demand takes a hit as the brand changes over to a new version of its basic three-door hatchback model.
This article first appeared on bloomberg.com