BMW Profits Gain on Strong Sales Growthhttp://www.fool.com/investing/general/2014/03/13/bmw-profits-gain-on-strong-sales-growth.aspx John Rosevear
March 13, 2014
German luxury-car giant BMW (NASDAQOTH: BAMXF) reported a surprise fourth-quarter-profit gain on Tuesday, thanks to increasing global demand for its compact luxury offerings.
BMW said that it earned 1.95 billion euros ($2.7 billion) before interest and taxes, up from 1.87 billion euros in the year-ago quarter -- and well ahead of the 1.83 billion euro Wall Street estimate, according to Bloomberg.
Sales booming, but so is spending
BMW is in a tight global sales race with German rivals Audi and Mercedes-Benz. Audi's corporate parent Volkswagen (NASDAQOTH: VLKAY) is making a massive push to become the world's largest-selling automaker by 2018, while Mercedes' parent Daimler (NASDAQOTH: VLKAY) is looking to overtake BMW in global sales by 2020.
That pressure has led BMW to boost its investments in advanced technology and new production facilities, part of its own long-term plan to stay ahead of rivals. A big part of that plan focuses on China, where BMW has trailed Audi in the country's white-hot luxury-vehicle race.
A strong luxury market is drawing lots of competition
Luxury vehicles are much more profitable than mass-market cars, and the global market for luxury vehicles is growing more rapidly than the overall market. Those conditions are drawing a lot of competition -- far more than BMW's traditional German rivals.
Fiat Chrysler (NASDAQOTH: FIATY) is believed to be planning a major push into BMW territory with its Maserati and Alfa Romeo brands. Tata Motors (NYSE: TTM), the Indian automaker that owns Jaguar and Land Rover, is working on several new models, including a