FRANKFURT: German luxury car maker BMW fell into loss early this year amid weak demand for luxury cars, but the results on Wednesday were a welcome surprise for analysts and the shares surged.

BMW made a first-quarter net loss of 152 million euros (202 million dollars), a statement said, compared with a profit of 487 million in the same period of 2008.

The group declined to give an outlook for 2009, citing "the unprecendented magnitude of the economic downturn," but said markets were "bracing themselves" for decreases of at least 10 percent.

Chief executive Norbert Reithofer was quoted as adding that "in view of the difficult conditions still prevailing on the financial markets, we remain focused in our efforts to improve our liquidity position."

Core earnings swung to a loss of 55 million euros from a profit of 827 million, as sales slumped by 13 percent to 11.5 billion euros from 13.3 billion, the statement said.

Those results were nonetheless "much better than expected," according to Dow Jones Newswires, and shares in the company leapt by 4.11 percent to 28.62 euros in morning trading on the Frankfurt stock exchange.

The DAX index of leading shares was 0.30 percent lower overall.

BMW's net loss was less than half that feared by the market, while analysts had foreast a core earning loss of 275 million euros and 10.5 billion euros in sales.

BMW said "sharp drops in sales volume on major markets" and high financing costs were key factors in the first quarter losses.

A total of 277,264 automobiles were sold in the first three months of the year, down from 351,787 in the first quarter of 2008, the statement said.

In addition to the BMW brand, the group owns MINI and Rolls-Royce.

The group said it had trimmed costs during the first three months of the year and reduced inventories.

It was also "deliberately strengthening its liquidity base" after having taken substantial provisions for losses in key leasing operations.

"We were able to generate a positive free cash flow of 220 million euros," Reithofer said. BMW had 10 billion euros in cash at the end of the first quarter.

But the company said 2009 would be a year of "transition," before several key model launches, including a new 7 Series and a new Z4 model were expected to generate fresh demand next year.

"The BMW group does not expect to achieve the sales volume level recorded in 2008," it said.

And if used-car markets remained depressed, "further losses on the sale of vehicles coming out of leases cannot be ruled out," it added.

BMW and its German rival Daimler, which makes Mercedes-Benz, have been hit particularly hard by the global slump in automobile markets, while leasing operations in the US have suffered losses amid the financial market turmoil.

A German government car scrapping premium of 2,500 euros for turning in old cars for new ones has resulted in strong demand for smaller, cheaper cars, while leaving luxury brands more or less on the sidelines.

But BMW maintained on Wednesday its 2012 targets previously set out in a long-term plan dubbed Strategy Number ONE.

They include acheiving return on sales of between eight and 10 percent in the auto segment.