BERLIN (Bloomberg) -- BMW AG, the world's biggest maker of luxury cars, made less money in the third quarter on its cars than Volkswagen AG's Audi and Daimler AG's Mercedes-Benz even as the revamped 5 series boosted profit.
BMW posted an automotive operating profit margin in the quarter of 8.1 percent, trailing Mercedes' 9.5 percent and Audi's 11 percent, according to data from the luxury carmakers. BMW today reported an 11-fold increase in net income to 874 million euros as the 5 series and X1 boosted sales 36 percent.
BMW's lower margin shows its vulnerability to its German rivals, which are part of larger groups. Audi benefits from sharing costs with other VW brands, while Daimler is also the world's biggest maker of trucks and buses.
BMW is responding by expanding the model lineup to secure its independence and fend off Audi, which aims to topple BMW as the luxury leader by 2015.
“It's a huge challenge for BMW and Mercedes to compete with the scale available to Audi through Volkswagen,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. “Audi clearly has the better cost position.”
BMW fell as much as 1.70 euros, or 3.3 percent, to 50.65 euros and was down 0.7 percent as of 14:21 CET in Frankfurt trading. The shares have gained 63 percent this year, valuing the carmaker at 33.2 billion euros ($46.5 billion).
BMW, which introduced remakes of the 5-series sedan and X3 SUV this year, as well as the all-new Mini Countryman, expects comparisons with rivals to improve as new models roll out. The 5 series and X3 compete with Mercedes' older E class and GLK models.
“We're at the beginning of a major model offensive,” Chief Financial Officer Friedrich Eichiner said Wednesday on a conference call. “We're on an upward trend.”
Mercedes and Audi are also pushing out new models. Audi, which plans to increase its lineup to 42 vehicles by 2015 from 34 last year, introduced the new A1 subcompact and A7 coupe this year and will roll out a revamped A6, which competes with the 5 series, in 2011.
Mercedes is overhauling the SLK hardtop roadster and CLS coupe for next year and will start an expansion of its small-car models late in 2011.
Luxury-car sales are rebounding from the financial crisis as demand advances in China and rebounds in the United States, the world's top two auto markets.
September marked the highest output of Mercedes cars for the month in the company's 120-year history, while Audi targets record sales in 2010 of 1.08 million vehicles. BMW aims to deliver more than 1.4 million car this year, a level topped only in 2007 and 2008.
Munich-based BMW's profit per vehicle averaged 2,300 euros this year, compared with Audi's 2,346 euros and Mercedes' 3,395 euros, Dudenhoeffer estimated. Stuttgart-based Mercedes, which typically commands higher prices than Audi and BMW, has the most ambitious profit targets.
The Daimler unit aims to generate operating margins of at least 10 percent by the second half of 2012. BMW's goal is to generate sustainable profit margins of at least 8 percent by 2012, while Audi is also targeting 8 percent for the long term.
“The record third-quarter earnings can't necessarily be extrapolated going forward,” Audi spokesman Armin Goetz said in a telephone interview from the carmaker's headquarters in Ingolstadt.
To counter Audi's scale advantage, Daimler CEO Dieter Zetsche swapped 3.1 percent stakes with Renault SA and Nissan Motor Co. in April. The aim of the partnership is to make Mercedes and its Smart unit more competitive in upscale compact cars. The automakers will cooperate on small engines and share a new platform to be used for the Smart subcompact and Renault Twingo.
BMW cooperates with PSA/Peugeot-Citroen SA in a partnership focused on four-cylinder gasoline engines and hybrid components for front-wheel-drive vehicles. Dudenhoeffer said BMW may need to deepen the cooperation with Peugeot to lower costs and keep pace in profitability.
BMW CEO Norbert Reithofer's Wednesday raised his target for automotive operating profit to more than 7 percent of sales this year from a forecast in August of a 5 percent margin. The higher guidance disappointed some investors.
“The profit margin looks clearly weak, much lower than Audi and Mercedes,” said Adam Hull, a London-based analyst with WestLB, who has a “reduce” rating on the shares. “The guidance is low. They should be able to do better.”