08:43, February 29, 2008
BMW, whose 7-Series sedan spews twice as much carbon dioxide as General Motors' tiny Corsa, may boost its stock 30 percent with cleaner engines that meet Europe's new carbon-emission rules.
BMW, Porsche and Daimler are spending billions of euros on motors for sport-utility and luxury vehicles that trail compact models from GM, Fiat and Renault in meeting European CO2 targets. The outlays will give the Germans a lead as clean-air laws tighten worldwide, MM Warburg Investment Research analyst Marc-Rene Tonn predicts.
"The regulations could easily become an advantage for the premium carmakers as they have always had to stay several steps ahead technologically and now will be forced to be even further ahead," Tonn said.
Makers of compacts lack the same spur to innovate because they face fewer environmental hurdles, he said.
Twenty-three analysts in a Bloomberg survey say BMW may reach an average of 47.08 euros, 27 percent more than Wednesday's closing price of 37.08 euros in Frankfurt.
Tonn, based in Hamburg, advises buying BMW and says the shares may hit 57 euros in a year, a 54 percent gain.
BMW, Daimler and Porsche have sunk as much as 20 percent since Dec 19, when the European Union said it would limit emissions from 2012. Twenty-three analysts recommend buying shares in Munich-based BMW, eight say "hold" and five "sell".
The EU is fighting climate change by capping CO2 emissions at an average of 130 grams per kilometer. That's a fifth lower than in 2006 and may add 1,300 euros to the price of the average car, the European Commission says.
Fines on automakers would start in 2012 at 20 euros per vehicle sold for each gram per kilometer above the new cap. The penalties will climb to 95 euros three years later.
BMW, the world's biggest luxury-car maker, and No 2 Daimler will need to trim CO2 output by 25 percent to avoid a penalty. Porsche, maker of the 911 sports coupe and Cayenne SUV, will require a 49 percent reduction.
Fiat, Italy's biggest carmaker, needs a 15 percent drop and PSA Peugeot Citroen requires 11 percent, according to the European Commission.
Peugeot, Fiat and other makers of smaller, less costly cars have lower profit margins and buyers who are more focused on price, said Michael Tyndall, an analyst at Nomura Securities in London.