BMW Earnings: Sign of Recovery at the High End

BMW earnings
BMW earnings

Bayerische Motoren Werke, also known as BMW, is the largest maker of luxury cars in the world. It announced that its second-quarter profits rose sharply from €119 million last year to €831 million ($1.1 billion) in the second quarter.

Sales were up 18% to €15.3 billion. The firm said sales were strong in China and the U.S., the world's two largest car markets. The number of vehicles sold during the period from April to June increased by 12.5% to 380,412 units (compared to 338,190 units in 2009), according to the company.

Much of the improvement was due to the sales of the new 5-Series sedan, which was introduced in June in the U.S. and in March in Europe. BMW said 25,000 units have been sold since its release.

The surge in sales of an expensive new model says something about the spending habits of the wealthy in Asia, Europe and the U.S. Car sales have recovered in most markets, but only modestly, and
they're still far from the historically high levels hit in 2006. The only large vehicle market where sales remain brisk is China.

The 5 Series is a $60,000 car, and with extra features it can cost over $70,000. It's telling that sales of the 5 Series were the primary component in revenue improvement for BMW. The car is also a gas-guzzler, with some models getting no more than 15 miles per gallon. Recent research has shown that many Americans still think the economy is in recession. It appears that when it comes to expensive cars, the rich may view things differently.