BMW Q1 Earnings Rise 19% On Surging China Sales

Bayerische Motoren Werke AG (BMW), the world’s largest maker of luxury vehicles, reported Thursday 19 percent rise in earnings in first quarter compared to the same period last year.

BMW reported that the earnings before interest and taxes in the first quarter rose to 2.13 billion euros ($2.8 billion) from 1.8 billion euros in the same period a year earlier, boosted by a surging demand in China and increased sales of sports utility vehicles led by the revamped 1-Series. The automaker said worldwide sales rose 11 percent in the first quarter compared to the same period a year ago.

Sales climbed 36 percent in China in the first quarter to make it a larger market than the US. Meanwhile, the demand remained flat in Europe as the debt crisis and economic slowdown continued to loom over the Eurozone.

BMW has kept the sales target of 2 million vehicles by 2016. It is expecting that deliveries in 2102 will rise from the previous year’s figure of 1.67 million. The company has projected that sales in China will rise by at least 10 percent this year while it is expecting a 5 percent sales decline in Europe.

China has become a key market for BMW, owing to the country's fast-paced economic growth and the higher prices. Bloomberg reports that BMW is able to have an average profit margin of 16 to 18 percent in China, compared with 10 to 12 percent globally.

BMW has been building the 3 Series and 5 Series models at its plant in Shenyang, China since 2003. It is also planning to build small cars for the China market. A new plant will start production this month in Tiexi in the Shenyang region, which will make X1 compact SUV. The new facility is designed to have annual capacity of 200,000 vehicles.

BMW also plans to launch a bigger version of its popular 3-Series sedan to milk the growing preference of the Chinese for larger cars.