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 (OTC: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 (OTC: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.