German car firms take pole position

Germany’s car industry has confounded analyst predictions, again.

BMW became the third of the nation’s top three carmakers to beat analyst estimates with a 19% increase in first-quarter profit. Volkswagen and Daimler-Benz last week also said earnings rose, countering expectations for a decline.

Carmakers and their suppliers are the best performing shares in Europe this year as demand for BMW, Mercedes and Audi models thrives in the US and China.

The thirst for German nameplates shows little sign of abating with new models including the VW Golf, the Audi A3 and the Mercedes-Benz A-Class all coming to market later in the year.

“For BMW and Volkswagen, I see a high probability that they will raise forecasts after the second quarter,” said Juergen Pieper, an analyst at Bankhaus Metzler. “In fact, I pretty firmly expect them to do so.”

Munich-based BMW said demand for the revamped 1-Series model fuelled record deliveries and maintained its forecast of an increase in pretax earnings after a record in 2011. The stock has advanced 43% so far this year.

BMW’s auto unit posted earnings before interest and taxes of 11.6% of sales, down from an 11.9% margin a year ago. That beat Audi’s 11.4% return on sales and Mercedes’s 8.4%. BMW’s deliveries rose to a record 425,528 vehicles in the first quarter from 382,758 a year earlier, as 1-Series sales climbed 20% and the X3 SUV surged 55%.

Porsche, which is combining with VW, also reported an increase in first-quarter profit yesterday, with Ebit gaining 18%. The company said sales of its revamped 911 model and Panamera four-door coupe led a 32% increase in revenue for the period.

Volkswagen provided the biggest surprise, reporting a 10% increase in operating profit for the first quarter on demand for models from its Audi luxury brand. VW shares have almost doubled in the past five years.

VW is thriving even amid Europe’s debt crisis and is taking market share from rivals!. The group, whose brands also include Skoda and Seat, increased first-quarter deliveries 9.6% to 2.16m vehicles. The gains compare with revenue declines at Peugeot Citroen, Renault and Fiat.

“Because Germany is up in April, their mix is helped as it is by far their most important market, more than 10 times more important than the Spanish, French and Italian markets individually,” said Adam Hull, of WestLB.

“What they’re being helped by is strong exports to China, Germany holding up, and the US market growing very strongly.”

Daimler, the owner of Mercedes-Benz, also beat expectations as it reported an unexpected 4.9% increase in first quarter profit on Apr 27, and stuck to its goal of matching last year’s €9bn in operating profit.


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