FRANKFURT (Dow Jones)--BMW AG (BMW.XE) said Wednesday its first-quarter net profit soared, the latest sign that booming demand in China and a recovery of the U.S. market are driving earnings in the luxury-car sector, and the German automaker managed to surpass rivals Mercedes-Benz and Audi AG (NSU.XE) in terms of profitability.

"We have generated record earnings and sold more cars in a first quarter than ever before," BMW Chief Executive Norbert Reithofer said in a statement.

The world's best-selling luxury-car maker reported first-quarter net profit jumped to EUR1.2 billion from EUR323 million last year.

Revenue in the three-month period climbed to EUR16 billion from EUR12.4 billion in 2010 and earnings before interest and tax, or Ebit, leaped to EUR1.9 billion from EUR449 million. Pretax profit rose to EUR1.81 billion from EUR508 million. All first-quarter figures were markedly above analysts' estimates.

At 1001 GMT, BMW shares were up EUR0.42, or 0.7%, at EUR63.79, outperforming a 0.2% rise of the DAX bluechip index.

"BMW is making profits beyond anything we could have imagined a few years ago, despite U.S. and German sales still early in the recovery phase," Sanford Bernstein analyst Max Warburton said in a note. "BMW is absolutely at the vanguard of a new era for German (automaker) profitability," he said. Warburton rates BMW stock as outperform.

BMW's car sales in the first three months of 2011 surged 21% year-on-year to 382,758 vehicles. In addition to higher sales volume, earnings were driven by a better model mix, improved efficiency and better selling prices.

BMW reiterated that it expects full-year car sales to rise well above 1.5 million vehicles, with all three of its BMW, Mini and Rolls-Royce brands anticipated to achieve record sales. In 2010, BMW sold 1.46 million cars, with growth in almost all major markets, up from 1.29 million in the prior year.

The operating profit margin at BMW's automotive division was 11.9% in the first quarter after 2.7% last year, which compares with 10.6% at Volkswagen AG's (VOW.XE) Audi unit and 9.3% at Daimler AG's (DAI.XE) Mercedes-Benz division. BMW, which traditionally provides conservative guidance, noted that its full-year Ebit margin target of more than 8% "remains in place."

Chief Financial Officer Friedrich Eichiner during a telephone conference confirmed previous statements saying that the pace of sales growth is expected to slow in the second half of the year, partly due to tougher comparisons as demand picked up in the course of last year. A year ago, demand for luxury cars still was muted by the industry downturn, but the sector staged a faster-than-expected comeback in the course of 2010 and has been running at full throttle since then.

Eichiner said favorable currency effects will roughly offset rising costs for raw materials such as rubber and steel this year.

BMW is investing heavily in expanding its production network in coming years as sales volumes, particularly in emerging markets, are expected to fuel further growth.

Its new plant in Tiexi, China, is due to start production in 2012. In India, BMW's plant in Chennai will start assembly of the X3 small sports-utility-vehicle in the second quarter. At home, BMW will invest EUR2 billion in plants in Germany in 2011 and 2012, including EUR400 million at its Leipzig plant for the launch of the electric i3 vehicle scheduled for 2013.

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BMW surpass rivals Mercedes-Benz and Audi in terms of profitability. Q1 sales up 21% Year-on-year.

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