LAST week BMW, which abandoned Rover in 2000, had a message of support for Land Rover and Jaguar as these companies head for a change of ownership. Jim O’Donnell, managing director of BMW UK, said: “The UK needs both Jaguar and Land Rover as strong competitors in the global marketplace.”

O’Donnell criticised politicians, who he said gave no consideration to the advances in technology that large and expensive cars introduced and which would subsequently benefit all motorists. This is a matter of particular concern to BMW, which recently has added a series of fuel-saving measures to its cars but knows that it cannot meet the EU’s proposed average carbon-dioxide regulations of 130 g/km.

Larger cars and 4x4s that emit more than 225 g/km CO2 are in the highest band for vehicle excise duty (£300 a year), will have to pay an inflated £25-a-day London congestion charge, and are subject to extra residents’ parking fees in some of the capital’s boroughs and in several other parts of Britain.

“The government must stamp on this regional tax spree by out-of-control councils and petty politicians,” O’Donnell said. “A determination to tax larger cars out of existence threatens smaller manufacturers such as Jaguar and Land Rover. Do our political leaders really want to kill off major contributors to the UK economy and major employers?”

Behind this special pleading – its showroom in London’s Park Lane pays £200,000 a year in congestion charges – BMW’s UK boss had to admit that there was, as yet, no sign of a drop-off in sales of premium-brand cars. October was a record month for BMW, 6.4% up on last year, and its 3-series model is seventh in the UK sales charts, the only £20,000plus car in the Top 10.

Meanwhile, in Germany, BMW’s chairman and chief executive, Norbert Reithofer, was announcing the group’s third-quarter results and predicting that by year-end it will have produced more than 1.4m cars and achieved record sales for each of its three brands – BMW, Mini and Rolls-Royce.

Apparently unperturbed by the CO2 issue, Reithofer, the production chief who took over as chairman in September this year, has set some ambitious targets for the future. By 2012 the company aims to sell 1.8m cars a year worldwide. This will put BMW firmly ahead of premium-brand rivals Mercedes-Benz and Audi, both of which are also enjoying record sales.

But although sales are up, profits are down. Group revenue for the first nine months of this year grew by 11%, to €4.04 billion (£2.8 billion), but the €2.68 billion profit before tax was 17.4% lower than in the same period in 2006. There was an exceptional gain from an exchangeable bond on shares in the aero-engine maker Rolls-Royce during the third quarter and, without that, BMW said the pretax profit would have fallen by only 9.4%.

Reithofer said he still expected the full-year’s profit figure to be higher than the record return in 2006.

Among the major car manufacturers, the group’s margin, at 7.2%, is exceeded only by Toyota’s (11.3%) but, speaking to The Sunday Times in September, Reithofer confessed he was “not happy” with the profit made by the car division – motorcycles and financial services do much better. From 2012, he has called for the group’s return on sales to increase to between 8% and 10%.

BMW is hedged against the declining dollar throughout 2007, but the continuing adverse exchange rate means that it must increase production and purchasing in America. Its factory in Spartanburg, South Carolina, will step up capacity from 140,000 cars a year to more than 200,000. Spartanburg will concentrate on the high-value X-series sports-utility vehicles. The small-volume Z4 sports-car production will move to Europe and an increasing number of 3-series saloons for the US will be built at the BMW plant in South Africa.

BMW continues to widen its car range and will add some new types of vehicle in the next two years. These include the X6,a coupé/SUV crossover that will also be available as a petrol-electric hybrid; a large, low-line, four-door coupé previewed in the CS concept car; and a luxury hatchback known as PAS (Progressive Activity Sedan). Rolls-Royce will introduce a new saloon, smaller and less expensive than the Phantom, and both the BMW 1-series and Mini will be supplemented by bigger SUV variants called sports-activity vehicles.

For small cars, rumours persist that BMW could join forces with its arch-rival Mercedes and use the same platform structure and other components for a future generation of Mini, Mercedes A-class and Smart cars. Neither company denies this possibility but Reithofer does not sound enthusiastic: “We must be very careful with strategic alliances. Tactical cooperation can be a different thing; we need cooperative deals for economies of scale. We are talking not only to other car manufacturers but also to the supply industry. But BMW must remain independent in its genetic structure – that’s very important.”

With pressure increasing to reduce CO2, might BMW build a car smaller than the Mini? Reithofer’s answer suggests that it will: “Yes, a smaller car is a possibility but we haven’t decided whether it should be a BMW or a Mini.”

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