BMW Reports Lower Profitability Than Mercedes as Growth Trails

(Bloomberg) -- BMW AG posted lower first-quarter profitability than Mercedes as the luxury car maker’s growth in deliveries trailed its German rival.

BMW’s operating margin in the automotive division fell in the period to 9 percent from 9.4 percent a year earlier, the Munich-based manufacturer said Thursday. That compares with an increase at Mercedes, with the return on sales jumping to 9.8 percent from 7 percent.

BMW’s profitability is taking a hit as its aging production lineup slows sales growth and forces the automaker to offer incentives to woo buyers. BMW’s first-quarter deliveries gained 5.2 percent compared with a 16 percent jump at Mercedes. BMW is banking on increased demand this year for the revamped 5-Series to counter Mercedes, which last year outsold its rival for the first time in a decade.

“The auto margin is where the question marks are -- it’s still early days for the 5-Series,” said Stuart Pearson, a London-based analyst with Exane BNP Paribas, referring to a revamped version of BMW’s bread-and-butter sedan. “Generally in the auto industry, the environment for pricing has been negative.”

BMW shares fell as much as 1.2 percent and were down 0.4 percent to 83.61 euros as of 1:59 p.m. in Frankfurt trading.

Profit Jump

BMW pre-released key results on Thursday after earnings beat expectations in part due to one-off items such as a higher valuation for its stake in the HERE mapping consortium.

First-quarter earnings before interest and taxes rose 7.7 percent to 2.65 billion euros, exceeding the 1.45 billion-euro average of three analyst estimates compiled by Bloomberg. The company stuck with a forecast for a “slight” rise in group profit before tax for the year. That figure jumped 27 percent in the first quarter.

BMW’s better-than-expected earnings follow similar results at Volkswagen AG and Mercedes-Benz parent Daimler AG, which also released figures earlier than scheduled after car delivery growth and other gains helped profit beat estimates. At BMW, positive effects from special items amounted to at least 305 million euros ($328 million), compared with 690 million euros at Daimler.

BMW is scheduled to publish full quarterly figures on May 4.

To contact the reporter on this story: Elisabeth Behrmann in Munich at ebehrmann1@bloomberg.net.

To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Chad Thomas