FRANKFURT (Bloomberg) -- BMW reported a 4.5 percent drop in first-quarter profit as the plunging European market pushed car prices lower.
Earnings before interest and taxes fell to 2.04 billion euros ($2.69 billion) from 2.13 billion euros a year earlier, the company said today in a statement.
BMW maintained its target for 2013 pretax profit on the same level as last year as rising demand in China and the United States helps to shield the automaker from the impact of the sovereign-debt crisis on Europe's car market, which is sliding to a 20-year low.
Earnings will hold steady this year as a decline in profit at the automaking business stemming from development costs and product-pricing pressure is offset by gains at the financial-service division, Chief Financial Officer Friedrich Eichiner said on a conference call with journalists.
Backed by new models such as the 4-series and 3-series GT, BMW is targeting record deliveries this year but spending to maintain its lead over Audi and Mercedes-Benz will eat into profit growth.
"Due to high levels of expenditure for new technologies and models as well as investment in the production network, we expect to report group profit before tax for 2013 on a similar scale to 2012," CEO Norbert Reithofer said in the statement.
BMW's first-quarter automotive profit margin declined to 9.9 percent from 11.6 percent a year earlier and compares to a margin of 11.1 percent at Audi in the period. Profitability at Mercedes' auto division dropped to 3.3 percent of sales from 8.2 percent a year earlier.
BMW reiterated today that Ebit at the auto division this year will be in the range of 8 to 10 percent of sales.
"The auto Ebit margin was an impressive performance," said Frank Biller, a Stuttgart-based analyst with LBBW. "It now depends on the second quarter and the expected improvements in the second half of the year if they can reach the upper end of the margin range."
Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler, said: "The fundamentals of BMW are very good. Still, 2013 won't be such an overwhelming year as a lot of BMW's core products, such as the 7 series, X5 and 5 series, are beyond their peak and in the latter part of their life-cycle."
New models
BMW is working to defend its No. 1 position in luxury car sales, which both Audi and Mercedes-Benz have vowed to seize by the end of the decade. BMW will roll out 25 new models by the end of next year, with 10 of them having no predecessor. Mercedes is bringing out 13 all-new models by the end of the decade. Audi plans to double its SUV lineup to six by 2020.
BMW is targeting a third consecutive year of record deliveries in 2013 as the automaker introduces variants of the best-selling 3-series such as the coupe-like GT and prepares to roll out its first electric vehicle, the i3 city car, at the end of the year.
The company is anticipating the vehicles to offset slumping demand in Europe. "We do not expect to receive a great deal of impetus from most European markets over the next few months and economic conditions in these areas are likely to remain challenging," Reithofer said.
BMW increased first-quarter vehicle sales 7 percent to 381,404, maintaining an 11,904-vehicle lead in global sales over Audi, on higher demand for the 3-series sedan and wagon, 6-series coupe and X1 sport-utility vehicle. Mercedes trailed in third place, with sales rising 3.5 percent to 324,898.
Production expansion
BMW is investing 200 million euros on a plant in Brazil to produce 30,000 vehicles annually starting next year and is looking at Russia as a possible spot to add manufacturing. Audi is adding production with a 150,000-unit plant in San Jose Chiapa, Mexico, where the automaker will start building the Q5 SUV in 2016.
BMW stock has lost 4 percent this year, valuing the company at 45.1 billion euros.
