BMW targets significant profit gain lifted by new models

BMW's product offensive this year includes the i8 plug-in hybrid, set to go on sale in June.
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FRANKFURT (Bloomberg) -- BMW Group forecasts ''significant'' gains in 2014 profit as new models like the 4-series Gran Coupe and i8 plug-in hybrid sports car propel record deliveries.

Pretax profit this year will beat 2013's 7.91 billion euros ($11 billion), lifted by 16 new and refreshed models and lower development spending, the company said in a statement today. Sales gains should be stronger in the second half, helping BMW maintain its status as the best-selling upscale car brand.

''BMW gave a surprisingly positive outlook,'' said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. ''They seem to be getting out of a phase of stagnation quicker than expected.''

Competition among Germany's premium carmakers is heating up as Audi, which ranks second in the segment on an annual basis, outsold BMW's namesake brand in the first two months of 2014. Mercedes-Benz, which holds third place, has boosted deliveries faster than the two larger rivals in recent months. BMW isn't giving up.

''We will remain the world’s leading premium car company'' this year, CEO Norbert Reithofer said today at a press conference at BMW's headquarters in Munich. ''We remain very confident about the business year 2014,'' with sales volumes set for a ''significant increase.''

The automaker said today it is looking at raising production capacity at its plant in the United States as it chases record global car sales.

BMW's plant in Spartanburg, South Carolina, which has an annual production capacity of around 350,000, makes SUVs, including the X3, X4, X5 and X6 models.

"The U.S. will stay a market with great potential for us. This is why we are evaluating the possibility of increasing capacity in the U.S.," Reithofer said.

Reduced r&d spending

BMW will rein in spending on research and development after investing 4.8 billion euros in 2013, the equivalent of about 6.3 percent of revenue last year. Development outlays this year should “move toward” the company’s target range of 5 percent to 5.5 percent, Chief Financial Officer Friedrich Eichiner said.

BMW has ramped up spending in recent years to fend off Audi and Mercedes, which both plan to take the luxury-sales crown by the end of the decade. The three German manufacturers are also facing a challenge from expansion by smaller producers of upscale vehicles, including Tata Motors’s Jaguar Land Rover and Fiat Chrysler Automobile’s Maserati.

“The continuous investment in innovations ensures our long-term success,” said Reithofer. When the company turns 100 years old in 2016, “we will not be looking in the rear-view mirror but focusing on the road ahead.”

Audi, which has never held the top luxury-car sales post for an entire year, will introduce 17 new or revamped vehicles in 2014, including a remake of the iconic TT sports car. Mercedes is hitting back by rolling out 30 autos by the end of the decade, including a dozen all-new cars.

BMW is responding with the upgraded X5 SUV introduced in November and the revamped X3 SUV, 2-Series Active Tourer minivan and i8 plug-in hybrid sports car coming out this year. BMW, which also owns the Mini and Rolls-Royce brands, is forecasting that group sales will exceed 2 million autos for the first time in 2014, achieving the target two years earlier than planned.

IHS Automotive estimates the BMW nameplate will sell 1.77 million cars this year, beating 1.66 million deliveries at Audi and 1.56 million at Mercedes. That would make BMW the best-selling luxury nameplate globally for the 10th straight year.

Last year, Mercedes brand sold 1.46 million globally, trailing Audi with deliveries of 1.58 million and BMW brand with 1.66 million.

Profit increase

Fourth-quarter earnings before interest and taxes rose 4.2 percent from a year earlier to 1.95 billion euros, BMW said. Automotive earnings narrowed to 9.2 percent of sales from 10.6 percent in the 2012 period.

The full-year margin from carmaking in 2013 was 9.4 percent, compared with 10.1 percent at Audi and 6.2 percent at Mercedes. BMW expects the margin this year to be between 8 percent and 10 percent.

Group deliveries gained 6.4 percent last year because of a 23 percent jump for the best-selling 3-series line to more than 500,000 autos. The model faces stiffer competition this year with Mercedes upgrading its popular C-class model, which will now be built on four continents.

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