BMW's sales in China jumped 72 percent in the first quarter as a growing army of super-rich in the country fuels demand for luxuries such as Gucci handbags and Rolls-Royce cars.
China now accounts for about 15 percent of the group's car sales, up from about 12 percent a year ago, and is hot on the heels of the United States and Germany, BMW's two biggest markets.
BMW, which also owns the Rolls-Royce and Mini brands, said on Wednesday first-quarter operating profit rose more than fourfold to 1.90 billion euros ($2.8 billion), exceeding the average analyst estimate of 1.51 billion in a Reuters poll.
BMW's strong results echo those of Volkswagen and Daimler whose growth was also driven by demand for cars in emerging markets such as China.
But China's car market -- the world's biggest ahead of the United States -- is expected to cool this year amid rising fuel prices and tighter rules on registration after surging by a third to a record high in 2010.
PACE SLOWING
While BMW rode the same wave as its peers in China, its auto business proved more profitable.
Operating profit margin at BMW's automobiles business widened to 11.9 percent, ahead of 9.8 percent at Daimler's Mercedes-Benz Cars and 10.6 percent at Volkswagen's Audi, helped by a 21 percent jump in quarterly vehicle sales and lower costs for materials.
"Is it sustainable? If Chinese premium sales remain at this level, then yes, at least in 2011," said Bernstein analyst Max Warburton.
BMW aims to post a full-year operating margin in the automobiles business of more than 8 percent, anticipating a slowdown in growth in the second half of the year as the Chinese market's steep rise flattens and Europe stagnates.
"We expect we will still have a good double-digit growth rate, but it's not going to be above 80 percent anymore," Chief Executive Norbert Reithofer said during a conference call.
Business will remain strong in the second quarter before slowing, finance chief Friedrich Eichiner said.
"But we would argue that with markets looking healthier than first thought it could be the surprises are on the upside," Barclays Capital analyst Michael Tyndall said.
The U.S. market is lending extra support to the industry with U.S. vehicle sales up nearly 18 percent in April and nearly 20 percent in the first four months of the year.
As gasoline prices in the United States near $4 a gallon, consumers there opt for smaller, more fuel-efficient cars, and a push by German carmakers such as BMW and Porsche to lower fuel consumption in luxury cars is paying off.
BMW's sales in the United States rose 19.6 percent in April, accelerating slightly from the first quarter thanks to demand for its new X3 offroader.
"With its pure-play strategy (as a premium car company), BMW is not taking part in the catch-up in the trucks market like peer Daimler, but it did not suffer from as great volatility as competitors in its last quarterly results," DWS fund manager Christoph Ohme told Reuters. (Reuters)
