Why BMW Is Spending Big to Beat Mercedes

Costs associated with BMW's new electric car, the i3, put a big dent in its third-quarter profits. BMW's costs have risen as it pushes to stay ahead of its German rivals. Photo credit: BMW

Among luxury-car makers, BMW has emerged as the company to beat. The German automaker has come to dominate the global sales charts, thanks to the power of its brand in all three of the world's largest auto markets -- China, the U.S., and Europe.

But the problem with being No. 1 is that you become everyone else's target. Both Daimler and Volkswagen , the respective corporate parents of Mercedes-Benz and Audi, have made it their goal to outsell BMW by the end of the decade. The companies have strong positions of their own: Mercedes-Benz is the luxury-car sales leader here in the U.S., and Audi absolutely dominates China's booming market for high-end vehicles.

BMW CEO Norbert Reithofer is determined to stay ahead of his company's two German archrivals, as well as the rising crop of luxury-car contenders from Japan and the United States. As Motley Fool contributor John Rosevear explains in this short video, that determination has put BMW on a spending spree -- one that is denting both the company's profits and its stock price.

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The article Why BMW Is Spending Big to Beat Mercedes originally appeared on Fool.com.

Fool contributor John Rosevear has no position in any stocks mentioned. The Motley Fool recommends BMW. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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