BMW Net Income
Declines by 38%;
Costs, Euro Cited


Keeping up with the competition is proving increasingly costly to BMW AG.
The German luxury-car maker reported a 38% decline in first-quarter net income. Part of the drop was because of a year-earlier gain, and the strong euro took a toll. BMW also cited rising costs for new-model introductions and for raw materials -- factors that could keep pressuring its financial results.
The pressures come amid intensifying competition in the luxury-car segment. DaimlerChrysler AG's Mercedes division, once a laggard, has seen growing sales and profitability, and Toyota Motor Corp.'s Lexus has posted big sales gains in the U.S. and Europe. These factors could challenge the operating strength BMW has demonstrated in recent years, when it surpassed Mercedes as the No. 1 luxury-car maker by vehicles sold.
Analysts cited BMW's narrowing profit margin. Its first-quarter earnings were broadly in line with expectations but show that the company had a tough quarter, said Nomura analyst Michael Tyndall. "They're likely to deliver according to their plans, but there's little upside potential," he said.
In Frankfurt, BMW shares rose 1% to €46.43 ($63.12).
Still, the car maker was bullish about the full year. Chief Executive Norbert Reithofer said the company expects to increase sales to more than 1.4 million vehicles from 1.37 million last year.
Mr. Reithofer said the response BMW received after the presentation of its Concept CS concept car at last month's Shanghai Auto Show was very good, voicing optimism that the model might go into series production at some point. However, he said, a possible series production has to be economically feasible.
Net profit in the quarter fell to €586 million from €947 million a year earlier. Sales rose 2.9% to €11.95 billion, while BMW's closely watched pretax profit fell 34% to €852 million.
Write to Christoph Rauwald at [email protected]