March 19, 2014 / 8:19 PM / in 5 years

BMW eyes U.S. production hike in push for sales record

MUNICH (Reuters) - German luxury carmaker BMW (BMWG.DE) is looking at raising production capacity at its plant in the United States and releasing 12 new models as it chases record sales and a rise in pretax profit of up to 10 percent this year.

A man cleans a BMW logo before the annual news conference of German premium automaker BMW in Munich March 19, 2014. REUTERS/Michaela Rehle

BMW’s plant in Spartanburg, South Carolina, is being readied to reach an annual production capacity of around 350,000 vehicles, up from 300,000 at the end of 2013. It makes sport utility vehicles including the X3, X4, X5 and X6 models.

“The U.S. will stay a market with great potential for us. This is why we are evaluating the possibility of increasing capacity in the U.S.”, Chief Executive Norbert Reithofer said at the company’s annual results press conference on Wednesday.

Analysts welcomed the outlook from the Munich-based owner of the Mini, Rolls-Royce and BMW brands.

“We see BMW’s confidence as a major positive trigger for the stock,” analysts at ISI Global said in a note to clients.

“The company has long been known for its conservative guidance and after a period of rather flat profit development, it’s interesting that it has chosen to be so confident,” analysts at Bernstein Research said.

BMW shares surged on the news, closing 7.3 percent higher, at 86.60 euros, making it the second-biggest gainer on the pan-European FTSEurofirst 300 index .FTEU3.

Reithofer declined to give a figure about future production levels at Spartanburg, or comment on whether BMW is thinking about producing a new model, the X7. The carmaker said it will make a further announcement about its U.S. plans on March 28.

Investments made at plants in China will allow BMW to raise production capacity there to 400,000 cars, from 300,000 in 2013.

BMW reiterated its aim to achieve a significant rise in sales volume in 2014 to 2 million or more, after it delivered a record 1.96 million cars in 2013.

“We expect group profit before tax to rise significantly in the current year, despite ongoing volatile business conditions,” Reithofer said, adding that the margin targets for the automotive division remain unchanged.

BMW said it expects spending on research and development to be closer to 5 percent and 5.5 percent of group revenue between 2014 and 2016, compared with around 6.3 percent in 2013.

Profit will rise because BMW will save costs by producing most of its cars using two common architectures, a front-wheel drive and a rear-wheel drive version, Reithofer said.

Chief Financial Officer Friedrich Eichiner later said a “significant rise” meant “somewhere in the range of a high single-digit and a double-digit amount.”

Last week, BMW reported a 1.4 percent rise in full year pretax profit to 7.91 billion euros.

The forecasts for 2014 are based on the assumption that political and economic conditions remain stable and on a steady recovery in European markets, BMW said.

BMW expects significant growth in markets outside Europe including high single-digit growth in North America and low double-digit growth in China.

The car maker said it expected sales in the second half of 2014 to be higher than in the first six months as a result of a large number of model launches, including the compact 2-series coupe and the 2-series Active Tourer.

By using the same underpinnings as BMW, the Mini brand will be able to develop a range of new vehicles, board member Peter Schwarzenbauer said, declining to elaborate what the future variants may be.

A key part of BMW’s push is to launch emissions free vehicles, such as the i3 electric car and an electric scooter.

Later this year BMW is launching the i8, a hybrid sportscar made of carbon fiber, with a starting price of around 126,000 euros and an initial production run of 1,000 vehicles, BMW board member for sales and marketing Ian Robertson said.

BMW will make greater use of carbon fiber in other models from its vehicle range, and is developing the next generation Z4 roadster together with Toyota Motor Corp.(7203.T), Robertson said.

Separately, BMW published its annual report, which showed that CEO Reithofer received total compensation of 7.03 million euros in 2013, a 6 percent increase on the previous year.

Reporting by Edward Taylor; Editing by Erica Billingham and David Evans

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