BMW Shrugs Off Europe Drop as Daimler Seeks More Capacity

Bayerische Motoren Werke AG and Daimler AG are shrugging off the European auto-market decline as sales growth in China and the U.S. pushes their luxury-car production to maximum rates.

BMW, targeting a third consecutive year of record sales, delivered more than 250,000 vehicles in the first two months of 2013, a jump of about 6 percent, and “our factories are running at full capacity,” Chief Executive Officer Norbert Reithofer said today at a Geneva Motor Show press conference. Daimler’s Mercedes-Benz unit is adding shifts to meet demand for compact cars, CEO Dieter Zetsche said at a separate briefing.

The two manufacturers, which rank first and third in global luxury-car sales, are pushing new models and targeting customers outside Europe to make up for a recession in the region. Their production rates contrast with the wider European auto industry, which may lose 3 percentage points of capacity utilization to 63 percent in 2013 as the market shrinks a sixth straight year, according to LMC Automotive consulting company.

“BMW and Mercedes have a whole bunch of new products at the start,” said Christoph Stuermer, a Frankfurt-based analyst at IHS Automotive research company. “Mercedes needs to fill the pipeline for the new A-Class compact and E-Class. It remains to be seen in about half a year how successful they really are.”

BMW is presenting the 3-Series GT crossover coupe at the Geneva show and preparing to roll out its first electric vehicle, the BMW i3 city car, at the end of the year. Zetsche is introducing the Mercedes CLA compact coupe and a revamped version of the up-scale E-Class sedan.

Weekend Shifts

Mercedes’s car plant in Rastatt, Germany, where the company builds the A- and B-Class cars, has negotiated 21 extra weekend work shifts to raise production, Zetsche said. The Stuttgart-based company lacks capacity to meet demand for compacts and sport-utility vehicles, he said.

After expanding production in the U.S. and China and deciding to assemble vehicles in Brazil, Munich-based BMW is looking to Russia for a possible production site after selling 40,000 vehicles there last year, Reithofer said.

“Russia is a market we can’t ignore,” he said.

China is the largest national market for both BMW and Ingolstadt, Germany-based Audi AG, the unit of Volkswagen AG that’s the world’s second-largest maker of luxury cars. Mercedes is reorganizing sales networks in the country in an effort to catch up. Zetsche, who has a target of retaking the worldwide luxury-vehicle delivery lead, said today that he sees Mercedes “on par” with its larger competitors except in China.

Global Estimate

Global car-industry sales will probably rise 4 percent this year to about 75.5 million cars, with the U.S. market growing by 2 percent and China’s by 8.5 percent, more than making up for a decline of 2 percent in Europe, Reithofer said. The sovereign-debt crisis will burden European economy for at least another five years, and countries in the southern part of the region haven’t bottomed out yet, he said.

“Europe is a great challenge” amid increasing competition, including in pricing, Reithofer said.

Reithofer’s prediction for the region’s car market compares with a contraction of 3 percent to 5 percent estimated by industry CEOs such as Renault SA’s Carlos Ghosn and PSA Peugeot Citroen’s Philippe Varin.

Varin said today in a Bloomberg Television interview that the decline will be closer to the 5 percent end of the range. European sales reported so far in 2013 have been worse than expected, Daimler’s Zetsche said.

To counter volatile car markets, BMW has established a production system that allows the manufacturer to build several models on the same line, Reithofer said. BMW decided to take volume out of the German market last year instead of granting more rebates, he said.

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