BMW launched its first-ever electric car, the i3, this past week. Costs associated with the launch weighed on BMW's earnings in the second quarter. Photo credit: BMW.

BMW (NASDAQOTH:BAMXF) said its second-quarter profits dropped 8.8% to about $2.3 billion before taxes, despite an increase in global sales. The problem: BMW's costs are up, as it rushes to develop more new models to compete with Volkswagen's (NASDAQOTH:VWAGY) surging Audi brand. BMW still leads Audi in total global sales, but VW's luxury brand is closing the gap -- and Audi already leads BMW in an even more important measure: profitability.

Some of the quarter's cost increase was driven by the ramp-up to this past week's launch of the BMW i3, the company's first-ever all-electric car. In this video, Fool contributor John Rosevear digs into the numbers to give you a closer look at what's happening at BMW, the company's latest new products including the i3 -- and how it will try to fend off Audi's latest surge.

Fool contributor John Rosevear has no position in any stocks mentioned. Follow him on Twitter at @jrosevear. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.