BMW Q1 boosted by Chinese, U.S. demand

Thursday, 5 May 2011 00:00 - - {{hitsCtrl.values.hits}}

BMW benefits from China, U.S. car sales growth
Still aims to sell more than 1.5 million cars this year

FRANKFURT, (Reuters) - BMW beat expectations in the first quarter on strong demand for luxury cars in China and growth in the United States, signalling the rebound in the global auto market is here to stay.

The company said it still aims to sell more than 1.5 million cars this year and post higher earnings than in 2010.

BMW, which also owns the Rolls-Royce and Mini brands, said on Wednesday its operating profit rose more than fourfold to 1.90 billion euros ($2.8 billion), exceeding the average analyst estimate of 1.51 billion in a Reuters poll.

The carmaker’s strong results echo those of rivals Volkswagen and Daimler whose sales growth was fuelled by demand for cars in emerging markets such as China.

Global luxury car makers, from Volkswagen’s Audi to Daimler’s Mercedes-Benz, have racked up eye-popping sales in China, where a growing army of super-rich is fuelling demand for premium items such as Gucci handbags and Rolls-Royce cars.

China’s car market -- the world’s biggest ahead of the United States -- is expected to cool this year amid rising fuel prices and tighter rules on registration after surging by a third to a record high in 2010.

The U.S. market, for its part, is lending extra support to the industry with U.S. vehicle sales up nearly 18 percent in April and nearly 20 percent in the first four months of the year.

As gasoline prices in the U.S. near $4 a gallon, consumers there opt for smaller, more fuel-efficient cars, and a push by German carmakers such as BMW and Porsche (PSHG_p.DE) to lower fuel consumption in luxury cars is paying off.

BMW’s sales in the United States rose 19.6 percent in April, accelerating slightly from the first quarter thanks to demand for its new X3 offroader, which has been on sale in the country for three months now.

Compared with a year earlier, BMW’s profitability soared. The operating profit margin at its automobiles business widened to 11.9 percent from 2.7 percent, putting the company well on track to meet its 2011 target of more than 8 percent.

“Is it sustainable? If Chinese premium sales remain at this level, then yes, at least in 2011,” said Bernstein analyst Max Warburton.

“Currency, Chinese localisation and the US/EU mix may become bigger issues in future years but for now, BMW looks in a very, very good place.”

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