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By Michael Steen and Alexander Huebner
PARIS, Sept 26 (Reuters) - BMW said on Thursday it raised the unit sales target of its Mini for the second time this year but admitted the small British cult car would earn it smaller profit margins than its core BMW brand due to startup costs.
Chief executive Helmut Panke also told Reuters he expected BMW brand unit sales to rise five percent in the first nine months of 2002 and sell around 800,000 vehicles. By contrast, the luxury unit of DaimlerChrysler, Mercedes-Benz, said its unit sales were flat over the same period at 837,000 vehicles.
"This confirms our view that for the full year we will beat the record revenues and profit we posted in 2001," Panke told Reuters in an interview on the sidelines of the Paris auto show.
His comments helped BMW shares, which were trading 7.4754 percent up at 34.55 euros by 1557 GMT, outperforming the European auto sector which was up 5.76 percent.
BMW had raised its projected unit sales for the Mini by about 10 percent from a previous goal of 120,000 cars, Panke said. Originally the company had planned to sell just 100,000 Minis this year, a target it raised in May.
But, in his most candid statement on the issue to date, Panke said both the Mini, introduced last year, and the new BMW- built Rolls Royce, to go on sale in January, would be less profitable in their first product cycle than the firm's BMW brand cars. BMW product cycles tend to be around seven years.
"We will not hit our usual profitability targets in the Mini's first life cycle," said Panke. "But we won't lose any money either."
"Every project is steered by the same return on investment percentage target and in the first cycle for the Mini and the Rolls Royce it will be lower than for a (new BMW) 7-series or 5- series," he said.
COSTS OF NEW BRANDS
He added this was principally due to the capital costs of setting up new production facilities and creating a new brand. The company has spent 60 million pounds on a factory in southern England to build the Rolls Royce, once it gains the legal rights to the marque from Volkswagen on January 1.
Next year will also see the launch of a new version of BMW's 5-series saloon, which is estimated to be the single model that brings in most of its profit.
The company's profitability has held up well while mass market carmakers have suffered from a weak economy, but its decision to build the diminutive Mini, in a traditionally price sensitive segment, was seen by some analysts as a risk to the company's margins.
BMW has argued it can eventually make just as much with a car like the Mini, which it says fits into its strategy of building "premium segment" cars in all sizes.
Following the Mini's success, the company is now planning to extend its product range and Panke confirmed BMW was designing a convertible version.
Panke, in Paris to launch the company's new Z4 sports car, also expressed uncertainty about the state of the overall car market in 2003.
"Next year depends very strongly on how the economy develops," he said. "We said this year we thought the second half would show positive growth signals around the world. Now we have to say that has not happened in any of the big economic centres.
"In all parts of the world the possibility of military conflict in Iraq represents a risk so that a certain outlook for the car industry for next year is not possible," he said.