When you think about luxury cars, three things that often come to mind are “expensive,” “expensive,” and “expensive.” But for investors, it’s all about profits. And when it comes to the battle of which brings in the most bang for your buck, the three top dogs in the luxury market are Daimler AG (USA) (OTCMKTS:DDAIF)‘s Mercedes-Benz, BMW , and Toyota Motor Corporation (ADR) (NYSE:TM)‘s Lexus. So which one could make you the most money?
The art of war
On Aug. 1, BMW reported that it sold 24,043 BMW brand vehicles in July. That’s up from 21,297 for the same time last year, and an increase of 12.9% on a volume basis. BMW also stated that its best-selling car was the 3 Series, up 29.2% to 9,890 units sold.
Mercedes, meanwhile, reported that it sold 23,648 Mercedes brand vehicles, up from 19,311 for the same time last year. That’s a 22.5% volume base increase. Its best-selling vehicle was the C-class, up 34.3% to 7,604 units sold.
Not to be too far outdone, Lexus reported that it sold 23,031 units, up from 18,235 from the same time last year, and a volume base increase of 25.5%. Its best-selling vehicle was the RX, up 10.1% to 8,437 units sold.
It’s not all about volume
All three luxury manufacturers were close in terms of volume sales. However, there’s more to evaluating a company than units sold. For example, BMW posted the best volume, but for its overall second-quarter profits, it experienced an 8.8% drop. Why? In large part BMWs profit loss was driven by its investment in its new, all-electric i3, and, more specifically, its investments to expand factories and produce carbon-fiber parts for the EV.
However, depending on how the i3 does, this could be a big win down the road. But that’s a big “if.” The i3 doesn’t go on sale until Q2 of 2014, but if it does well, it could have a positive impact on BMWs stock. If it doesn’t, then the opposite is true.
The call of China
Another factor investors should consider is China, whose premium-car market has increased by a compounded annual rate of 36% in the past decade. In fact, China’s luxury auto segment is expected to climb 7% to 12% this year, which is great news for luxury-car makers.