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BMW, Audi Expand Factories as Record Sales Constrain Capacity

Bayerische Motoren Werke AG, Daimler AG and Audi AG, the world’s three largest luxury-car makers, will expand factories this year to ease capacity constraints driven by record demand for their vehicles.

Volkswagen AG’s Audi, vying to top BMW as the world’s bigger maker of premium vehicles by 2015, said today it will increase production to build more cars and SUVs in 2011 than the 1.15 million produced in 2010. BMW and Daimler’s Mercedes-Benz also plan to expand plants, including in the U.S. and Germany.

“The top three are poised for further growth,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler who recommends buying VW, Daimler and BMW shares. “The momentum in luxury markets will continue this year and also in 2012. It’s a necessity for manufacturers to take steps to address this.”

Germany’s luxury carmakers are benefiting from increased deliveries in China and the U.S., the world’s two largest auto markets, as the global economy bounces back from recession. Audi plans to spend 11.6 billion euros ($15.7 billion) through 2015 on plants and new models. BMW has spent 1.5 billion euros alone on its German plants since 2009, while Daimler is building an 800 million-euro small-car plant in Hungary.

Audi said today it will roll out a total of 13 new models and upgraded vehicles this year, including an updated version of its A6 sedan and the Q3 compact SUV. The VW unit will spend more than 5 billion euros at two German factories in Ingolstadt and Neckarsulm, where the A6 will be built. Audi also said it will begin work this year to expand a factory in Gyor, Hungary, to increase capacity to 125,000 cars.

Record Sales

BMW, which is forecasting record sales of more than 1.5 million BMW, Mini and Rolls-Royce models this year, is spending 400 million euros at its factory in Leipzig, Germany, to prepare for the production of an electric city car by 2013.

The Munich-based carmaker late last year completed a $750 million expansion of its U.S. factory in Spartanburg, South Carolina, to make room for the revamped X3 sport-utility vehicle. The company is also expanding capacity in China, India, and South Africa, spokesman Daniel Kammerer said today.

Daimler is expanding factories to accommodate revamped versions of the B-Class compact and SLK hard-top roadster due this year and to ease production constraints that may limit deliveries.

Mercedes projects sales this year will exceed the previous record of 1.29 million vehicles sold in 2007. Deliveries in 2011 will be “defined by production capabilities rather than demand,” Daimler Chief Executive Officer Dieter Zetsche said Jan. 10 at the Detroit auto show. “That’s a good problem to have.”

To boost capacity, Daimler is spending 600 million euros on the B-Class factory in Rastatt, Germany. The carmaker’s facility in Bremen will get more than 100 million euros in investments for the SLK and to expand the body shop. Mercedes is also expanding assembly and paint shop facilities at its U.S. factory in Alabama, spokesman Markus Mainka said.

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