Norbert Reithofer, chief executive officer of Bayerische Motoren Werke AG (BMW), pauses during a media interview on the first day of the 83rd Geneva International Motor Show in Geneva, Switzerland, on Tuesday, March 5, 2013. This year's show opens to the public on Mar. 7, and is set to feature more than 100 product premiers from the world's automobile manufacturers. Photographer: Chris Ratcliffe/Bloomberg *** Local Caption *** Norbert Reithofer

Frankfurt - BMW, the biggest maker of luxury vehicles, posted a surprise 4.2 percent gain in fourth-quarter profit, boosted by stronger demand for the 3-Series sedan and station wagon.

Earnings before interest and tax rose to e1.95 billion (R29.4bn) from e1.87bn a year ago, BMW said yesterday. The figure beat the e1.83bn average of 10 analyst estimates. The shares gained the most in almost three months.

“We forecast further sales volume growth in the current year which will again bring us a new all-time high,” chief executive Norbert Reithofer said.

BMW is stepping up investment in technology and expanding production to hold off Audi and Mercedes-Benz, which have vowed to take the luxury sales crown by the end of the decade. The race is tightening. Volkswagen’s Audi outsold BMW’s namesake brand in the first two months of this year, while Daimler’s Mercedes has grown at a faster pace than its two larger rivals in recent months.

“BMW’s numbers look good,” said Erich Hauser, an analyst at International Strategy and Investment Group. “Fourth-quarter margins were stronger than expected.”

The shares gained as much as 3.3 percent to e82.88, the biggest jump since October 15, and were up 2.8 percent by 11.33am in Frankfurt. The stock has advanced 16 percent in the past 12 months, valuing the company at e53.2bn.

Sales for the group last year rose 6.4 percent to 1.96 million vehicles, lifted by a 23 percent gain in deliveries of the BMW 3-Series to more than 500 000 cars.

The model faces stiffer competition as Mercedes rolls out an upgraded C-Class and plans to add variants of its best-seller to better target customers across the globe.

Automotive earnings for the maker of BMW, Mini and Rolls-Royce vehicles fell to 9.2 percent of sales in the fourth quarter from an operating profit margin of 10.6 percent a year earlier. For the full year, BMW’s automotive margin was 9.4 percent, compared with 10.1 percent at Audi and 6.2 percent at Mercedes.

BMW said in November that spending would continue at a high rate this year. It planned to invest about e4.8bn last year to add production capacity and develop new technology, exceeding its capital expenditure target.

With German car makers vying for top spot and brands such as Jaguar and Maserati expanding, competition in the luxury-car segment was “more intense than ever”, Audi chief Rupert Stadler said. Audi, which has never held top post for a full year, will introduce 17 new or revamped vehicles this year, including a remake of the TT sportster. Mercedes is rolling out 30 by the end of the decade, including a dozen all-new cars.

BMW is responding with the upgraded X5 sport-utility as well as new models like the 4-Series Gran Coupé, the 2-Series Active Tourer hatchback and the i8 plug-in hybrid sports car. BMW forecasts sales for the group, including Mini and Rolls-Royce, to exceed 2 million cars for the first time this year.

BMW recommended a dividend of e2.60 a share, up from e2.50 in 2012. Net income for 2013 rose 4.5 percent to e5.34bn. BMW will release details of 2013 earnings on Wednesday. – Bloomberg