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Last Updated : May 04, 2011 02:15 PM IST | Source: Reuters

BMW profit seen tripling on Chinese love of luxury

Echoing rivals Volkswagen and Daimler, BMW is all set to announce its eye-popping sales figures in China, where a growing army of super-rich is fuelling demand for premium items such as Gucci handbags and Rolls-Royce cars.

BMW is expected to post strong first-quarter results, echoing rivals Volkswagen and Daimler, on Chinese demand for luxury cars and recovering markets in Germany and the United States.

BMW, which also owns the Rolls-Royce and Mini brands, is expected to announce on Wednesday that its core earnings more than tripled to about 1.5 billion euros ($2.2 billion) in the three months through March.

Global luxury car makers, from Volkswagen's Audi to Daimler's Mercedes-Benz, have racked up eye-popping sales in China, where a growing army of super-rich is fuelling demand for premium items such as Gucci handbags and Rolls-Royce cars.

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.

The US market, for its part, is lending extra support to the industry with US vehicle sales up nearly 18 percent in April and up nearly 20 percent in the first four months of the year.

Shares in European automobile stocks lagged the wider market on Tuesday with analysts citing a recent slowdown in Chinese manufacturing growth.

"Autos are very China-exposed and are therefore disproportionally affected by any negative news there," Credit Suisse analyst Arndt Ellinghorst said, referring to a surprise contraction in Chinese PMI data on Sunday.

Volkswagen, Europe's largest carmaker, and Daimler last week both reported robust quarterly earnings, with emerging markets fuelling sales growth.

BMW has said it sees the Chinese market for premium cars and its own sales there rising by at least 10 percent this year.

The company with its Chinese joint venture partner Brilliance makes cars at a plant in Shenyang, including an extended wheelbase version of the 5-Series sedan developed especially for the local market.

When BMW reports financial results on Wednesday, investors will also be looking for any comments on 2011 earnings that are more specific than the guidance the company gave in March. At the time, it said it saw 2011 pretax profit above the 2010 level, with an operating margin in its automobiles business of more than 8 percent.

That outlook is seen as somewhat conservative. A Reuters poll shows that analysts on average see BMW's pretax profit up 21 percent this year, with an operating margin in the automobiles business of about 9 percent.

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First Published on May 4, 2011 08:24 am
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