BMW is one of the world's most profitable carmakers

Sales for the year totalled 49bn euros (�32.2bn; $63.3bn).

Chairman Norbert Reithofer claimed 2006 was "the best in the company's history" and predicted sales would rise to 1.4 million cars in 2007.

However, the forecast came as analysts warned that producers of gas-guzzling cars faced growing pressure from European environmental regulations.

Mini factor

BMW also said that expanding its UK plant in Oxford had led to a decline in sales of its Mini cars.

The company, whose other marques include Rolls-Royce, said sales of Minis fell by 6.2% in 2006, while 188,077 Minis were assembled at the Oxford plant.

Porsche has made smart moves in the financial markets

After the rebuilding programme has been completed, the Oxford factory should have a capacity of 240,000 cars a year, the company said.

Demand for BMW's best-selling 3-Series cars helped compensate for the dip in Minis sales, it said.

BMW, and its domestic rival Porsche, are potential losers if the European Commission's imminent review of carbon emissions recommends a tax-based approach to reducing pollution, a report from Citigroup Research has claimed.

Citigroup's automobile industry report said that should taxes be introduced that would penalise larger vehicles, then makers of smaller cars such as Fiat may benefit.

Porsche said Friday that its net income had jumped to 1bn euros in the half year to 31 January from 170m euros a year earlier.