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By Bloomberg

Bayerische Motoren Werke AG, the world's biggest maker of luxury vehicles, fended off stiffening competition from Audi and Mercedes-Benz with profit that beat analyst expectations on demand for the X5 sport-utility vehicle.

Earnings before interest and taxes rose 17 percent to a record for the period of 2.26 billion euros ($2.83 billion), exceeding the 2.03 billion-euro average of 13 analyst estimates compiled by Bloomberg. Buoyed by demand for the full-size X5 and the new coupe-like X4 SUV, automotive profitability beat BMW's two closest rivals.

"BMW continues to deliver very strong earnings, and the outlook for the rest of this year remains very encouraging," said Arndt Ellinghorst, an analyst with Evercore ISI in London.

BMW has added models like the 4-Series coupe and the van- like 2-Series Active Tourer to thwart plans by Audi and Mercedes to take the No. 1 spot in luxury cars by the end of the decade. That lead may become tougher to defend as BMW's key sedans age and Mercedes and Audi add models.

"Next year, I expect a slight tendency for BMW to lose market share as some models are a little older," said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler.

BMW's auto unit, which also makes Mini and Rolls-Royce cars, generated Ebit of 9.4 percent of sales, improving from a margin of 9 percent a year earlier. That beat the 9.2 percent return on sales at Volkswagen AG's Audi, while Daimler AG's Mercedes reported a two-year high profit margin of 8.5 percent.

Slower Growth

Still, BMW didn't match rivals' growth in the third quarter. Its auto deliveries rose 5.8 percent to 509,669 vehicles, including Mini and Rolls-Royce models. Mercedes sales, including the Smart brand, rose 9 percent to 431,000 vehicles, while Audi delivered 429,925 cars, 7.2 percent more than a year ago.

BMW stuck to its forecast for a "significant" increase in 2014 pretax profit from last year's 7.9 billion euros. BMW plans to deliver a record of more than 2 million vehicles this year, even as Mini demand takes a hit as the brand changes over to a new version of its basic hatchback model.