BMW said on Wednesday it was optimistic about first-quarter earnings and expected recent model launches to fuel record 2004 profits, but its shares failed to react as investors had hoped for more.

After two years of investing heavily in hotly anticipated new products like the redesigned 5-series, the Munich-based luxury carmaker said it expected to reap the rewards in 2004, Reuters reported.

“We will begin to harvest the fruits of our product and market offensive this year,” chief executive Helmut Panke reportedly said, after predicting that pre-tax profits should exceed the record €3.3 billion ($US4.07 billion) posted in 2002.

Despite a weak start to the year for the car  industry as a whole, Panke said BMW would enjoy the best March ever in terms of vehicle sales and told Reuters that he was “quite optimistic” for first-quarter earnings.

The news agency noted that BMW’s continued optimism comes in stark contrast to many of its competitors, who are suffering from the strong euro and slack consumer demand. Volkswagen last week said that a “lousy” first quarter would mean topping its 2003 operating profit of €2.5 billion before one-offs would be an ambitious goal.

But analysts and brokers told Reuters that record earnings this year were the least BMW could promise investors.

HVB auto analyst Georg Stuerzer reportedly called the target a “minimal goal” – he is predicting pre-tax profit of €3.9 billion.

Record pre-tax profit in 2004 means only that BMW will lift earnings by slightly more than 3% from the €3.2 billion euros earned in 2003 and BMW would have matched 2002’s €3.3 billion profit last year had it not been for an unexpected move to raise provisions by an additional €110 million, Reuters said.

The company also reiterated that vehicle sales in all three of its brands will increase in 2004, helped by a flood of new models like the Mini cabrio, the X3 compact sports utility vehicle, as well as a significant boost in shipments of its super-luxury Rolls Royce Phantom, the report added.

According to Reuters, BMW’s chief financial officer Stefan Krause said that, with demand strong in the US, the carmaker would consider increasing its production capacity there, if the market for premium cars continues to post substantial growth rates.

Despite a severe weakening of the dollar in 2003, BMW boosted vehicle sales in the US by 8%% to 277,000 units, as the country became the largest single market for BMW for the first time in history, the report said.

Krause reportedly said, however, that BMW would stop increasing its currency hedging, since he believes the greenback is already significantly undervalued.

Reuters said this could prove to be extremely risky, as BMW’s dependence on the US market has grown considerably and overall BMW car sales there have quadrupled in the past 10 years.