FRANKFURT (Bloomberg) -- BMW Group reported a 3 percent rise in first-quarter profit as increasing demand for its SUVs helped offset spending on expansion.
Earnings before interest and taxes rose to 2.09 billion euros ($2.9 billion) from 2.04 billion euros a year earlier, the company said today. Revenue gained 4 percent to 18.2 billion euros ($25.3 billion).
"The BMW Group has made a strong start to the current financial year with new record first-quarter figures," CEO Norbert Reithofer said in a statement.
The BMW brand's first-quarter deliveries surged 12 percent to retain the top post in global luxury sales over rivals Audi and Mercedes-Benz, which are No. 2 and No. 3, respectively. Audi and Mercedes have both vowed to surpass BMW by the end of the decade.
BMW's gains were led by demand for its portfolio of SUVs. Deliveries in the period for the X1 climbed 15 percent; the X3, 11 percent; and X5, 14 percent.
BMW today stuck with its target for a significant gain in 2014 pretax profit as models such as the 4-series Gran Coupe and the 2-series compact hatchback are set to propel sales. First-quarter earnings on this basis rose 8 percent to 2.17 billion euros.
"We are aiming for a new record group profit before tax figure, which will be significantly higher than in the previous year," Reithofer said.
Pretax profit will rise by at least a high single-digit percentage above 2013's 7.91 billion euros, Chief Financial Officer Friedrich Eichiner said in March. Earnings will be lifted by 16 new and refreshed models.
BMW ramped up spending on new vehicles and technology in recent years to keep Audi and Mercedes at bay.
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 rolling out 30 autos by the end of the decade, including a dozen all-new cars.
BMW is responding by adding the X4 SUV and the 2-series Active Tourer in 2014 and will start deliveries of the i8 plug-in hybrid supercar next month. The automaker is also spending $1 billion to expand production at its U.S. factory, where it builds SUVs, by 50 percent and is considering a second plant in North America to meet rising sales.
BMW overall plans to rein in spending on r&d after investing 4.8 billion euros in 2013, the equivalent of about 6 percent of revenue last year. Development outlays this year should "move toward" the company's target range of 5 percent to 5.5 percent, Eichiner said in March.
BMW's automotive unit posted first-quarter EBIT that was a 9.5 percent of sales. That compares with an operating margin in the period of 7 percent at Mercedes and 10 percent at Audi.
The three German manufacturers are also facing a challenge from smaller producers of upscale vehicles, including Tata Motors's Jaguar Land Rover and Fiat Chrysler Automobiles’ Maserati, which are adding models to lure customers and grab a bigger chunk of this lucrative market segment. Profit margins for premium cars tend to be larger than for mass-market vehicles.
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. It expects to retain the top spot in the global premium-car segment, which would make BMW the best-selling luxury marque globally for the 10th straight year.