The economy may not be great, but things are definitely looking up for some folks. The latest sign: Luxury car sales are booming.
BMW (NASDAQOTH:BAMXF) said on Monday that last month was its best April ever. The German luxury-car giant said that worldwide sales in April for its three auto brands were up 6.8% over year-ago totals.
For the year, BMW's total auto sales are up 5.7% to an all-time high.
You may think that luxury-car sales gains don't matter to normal folks. But luxury cars are very profitable products, and companies like BMW can represent intriguing investments. Read on.
Relatively small sales lead to huge profits
BMW makes and sells three brands of vehicles: Mini, BMW, and Rolls-Royce. Most of the cars it sells around the world are BMWs, but Mini represents an important chunk of the business. (Rolls-Royce sales are tiny, but the profit per car sold is believed to be very high.)
The BMW brand sold 130,598 vehicles around the world in April, up 7.5%. BMW's compact 3 Series and midsized 5 Series sedans accounted for the bulk of that volume, with nearly 70,000 sales between them.
The 3 Series is BMW's best seller, and BMW executives often say that it's their company's most important product. It's the car most often sold to first-time BMW owners, and the company depends on it to build long-lasting owner loyalty.
Mini sales were much smaller, at 24,581 for the month. The Mini is a niche product, but it's valuable to BMW for more than its contribution to the company's bottom line. Mini helps BMW increase its total small-car sales without diluting the BMW brand, which helps it meet some countries' fuel-economy regulations.
BMW also makes and sells premium-priced motorcycles, of course. Its two-wheeled division is called BMW Motorrad, and it had its most successful month ever in April, with sales up 11.5% over year-ago totals – another luxury line that is seeing good gains recently.
And Rolls-Royce? BMW didn't give an official sales number for the stately British brand, but a little subtraction suggests that 240 Rolls-Royces were sold during the month.
Strong results as BMW invests to keep pace with rivals
Earlier in May, BMW reported a $2.69 billion first-quarter profit that blew away analyst estimates. That's despite total sales that are significantly less than those of mass-market automakers like Ford (NYSE:F), which made $1.6 billion in the first quarter. The company reiterated its previous guidance, saying that 2013's full-year pre-tax profit would roughly match last year's despite worsening market conditions in Europe, BMW's home base.
How will they manage that? Rising demand in the U.S. and China, and a slew of new products. BMW is planning to launch 25 new or overhauled products by the end of next year, including 10 that represent new niches for BMW.
Competition will be fierce, though. German arch-rivals Mercedes-Benz and Volkswagen's (NASDAQOTH:VWAGY) Audi brand are both investing heavily in new products and factories as well. And BMW is facing stiff competition in some parts of the world from Toyota's (NYSE:TM) luxury Lexus brand, as well as increasing pressure from GM's (NYSE:GM) Cadillac, which is in the midst of a major overhaul.
Still, BMW's new products should continue to keep the German luxury giant on track.