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S-class's rise signals better times ahead for premium brands

If you want more proof that the world is emerging from the Great Recession then look no further than Sindelfingen, Germany.

That is where Mercedes-Benz produces its S-class sedan.

Last April, the plant made 675 units of the Mercedes's flagship, which starts at 73,740 euros (about $90,500) in Germany. Last month, output rose nearly 800 percent to 6,012 units, according to estimates from J.D. Power Automotive Forecasting.

The market researcher's data shows that Mercedes made equally big year-on-year output gains last month for the CLS (+405%), SLK (+390 percent) and E class (+144 percent). The cheapest of the three is the E class with a starting price of 39,270 euros in Germany.

It's no wonder that Mercedes says its second-quarter earnings before interest and taxes will exceed the first quarter's 806 million euros.

Audi, which passed Mercedes brand to become the world's second-largest premium carmaker in March, expects strong demand this year for its new A8, which starts at 89,300 euros. The arrival of the S-class rival is forecast to help Audi's EBIT rise faster than revenues this year.

Meanwhile, BMW expects the EBIT margin for its auto division to reach a low single-digit percentage thanks partly to the arrival of the new 5 series (German base price: 39,950 euros).

It is worth noting that a large number of those high-priced, high-margin cars are not being built for Europe. They are being shipped to places such as China and the United States. But the piles of money are coming back to Europe, and European production plants are benefiting.

Rising worldwide demand for cars built by Mercedes, BMW, Audi and other premium brands is one of the reasons why credit ratings agency Moody's revised its outlook for the global auto industry to positive from stable on May 19. After taking a vicious beating in 2009, premium automakers are poised to make the dark days of last year seem like ancient history.

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