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BMW, Audi Plan Production Expansion as They Vie for Luxury Lead

May 12 (Bloomberg) -- Bayerische Motoren Werke AG and Volkswagen AG’s Audi are both planning to expand capacity as they seek to lead the luxury-car market.

BMW, the world’s No. 1 luxury-car maker, is considering building two new factories in emerging markets to expand its lead over Audi, Chief Executive Officer Norbert Reithofer said today. Audi may build cars in the U.S. as it aims to increase its global workforce by 17 percent through 2020.

Audi, which has outsold Daimler AG’s Mercedes-Benz so far this year, is setting its sights on toppling BMW as the global luxury-car leader by 2015. The Volkswagen unit wants to expand in the U.S. and extend its lead over BMW in Europe and China with new cars like the A1 subcompact and Q3 compact sport-utility vehicle.

“We’re expecting further growth over the long term beyond 2015,” Chief Executive Officer Rupert Stadler said in a speech at Audi’s annual shareholders’ meeting in Neckarsulm, Germany. “That gives us confidence to further expand our product portfolio and develop our internationalization, possibly also with production capacity in the U.S.”

Audi, which employs about 60,000 people worldwide, plans to add 10,000 positions over the coming decade, the CEO said. The company expects China to keep growing “at a high pace” in the medium term. It’s also targeting U.S. sales of 200,000 cars and sport-utility vehicles starting in 2015, after deliveries in the market exceeded 100,000 vehicles last year for the first time.

‘Individual Mobility’

BMW isn’t sitting idle. The maker of BMW, Mini and Rolls-Royce cars is also expanding in emerging markets as it looks to guard its independence and fend off Audi. The Munich-based carmaker is evaluating sites for a plant in Brazil and considering building a new factory in Russia, India, South Korea or Turkey, Reithofer said at BMW’s annual shareholders’ meeting.

“People in these countries want more individual mobility,” Reithofer said in a speech. “We want to further our lead in the premium sector.”

BMW’s joint-venture plant in Shenyang, China, is boosting investment to 1 billion euros ($1.42 billion) from 560 million euros. The automaker, which is also planning to invest 2 billion euros in German plants, is adding assembly of the X3 sport-utility vehicle to a factory in Chennai, India.

The company will pay a record profit-sharing bonus to employees this year based on 2010 results. Workers paid under collective-bargaining deals will get an average 5,840 euros, the equivalent of 1.6 times monthly wages. The company today confirmed its goal of increasing profit this year and selling more than 1.5 million vehicles. BMW aims to hire 2,000 people this year to support expansion, Reithofer said.

Dividend

BMW is proposing a dividend of 1.30 euros per share after 2010 net income surged to 3.22 billion euros from 204 million euros a year earlier. The investor payout is a record for the company, Reithofer said today.

The German carmaker earned more money per car than ever in its 95-year history in the first quarter because of surging deliveries of the revamped 5-Series sedan and lower spending on supplies. BMW made a profit of 4,462 euros per car on average, compared with 4,145 euros at Daimler AG’s Mercedes-Benz and 2,981 euros at Volkswagen’s Audi.

Sales of BMW’s 5-Series more than doubled to 85,400 vehicles in the first quarter, fuelling a 21 percent advance in total sales to 382,800 autos. BMW said May 4 it expects to sell “well over” 1.5 million vehicles this year, a record, surpassing the 2010 level of 1.46 million.

China Economy

China’s growing economy and a rebound in spending in the U.S. are driving record demand for vehicles from the three German luxury-car makers. VW reported first-quarter earnings before interest and taxes more than tripled because of demand for Audi in China. Daimler’s operating profit rose 71 percent, led by sales of the Mercedes S-Class.

Audi’s operating profit was 10.6 percent of sales in the first quarter, compared with 9.3 percent for Mercedes and 11.9 percent for BMW’s automotive division.

BMW is expanding its lineup to reach a goal of selling more than 2 million cars and SUVs annually by 2020. It has created the “i” electric-car sub-brand, which will start in 2013 with the i3, a battery-powered city car. BMW is also planning the i8, a hybrid supercar. The sub-brand’s models will have frames built largely of carbon fiber and display a blue ring around the BMW logo.

The company is developing front-wheel drive models for the BMW brand and plans to expand the Mini line with a coupe and roadster. The manufacturer is pushing into transport-related services and experimenting with short-term rentals. BMW has also started a $100 million venture-capital unit and invested in the MyCityWay guide service.

To contact the reporter on this story: Chris Reiter in Munich at creiter2@bloomberg.net; Andreas Cremer in Neckarsulm, Germany via acremer@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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