BMW is luxury car king, but reign might not last

May 4, 2007

German luxury carmaker BMW is struggling to convert its successes in recent years into long-term gains that leave Mercedes, Lexus, Audi and other rivals in the dust, according to a Bloomberg report.

BMW overtook Mercedes in May 2005 as the largest luxury car maker in the world as sales of its Mini Cooper gained traction and it gained cachet as the car of choice for entrepreneurs and up-and-coming executives.

Global Insight projects BMW garnering 27 percent of the global luxury car market this year, compared to 26.1 percent for Mercedes. Audi is expected to have 17.8 percent and Lexus, 9.9 percent.

Yet, BMW profit fell 38 percent in the first quarter as it continued to struggle with rising material prices and an inexpensive dollar.

To stay ahead of competitors, BMW incentives average $4,000 a vehicle in the United States. That’s close to twice the incentives offered by Lexus and Mercedes.

Meanwhile, Audi and Lexus are gaining market share, and Mercedes is rolling out new models that could lead to a greater share.

“BMW may be in for a tough six months or perhaps a tough couple of years,” USB AG analysts Max Warburton and Avaneesh Acquilla said in a research note.

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