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LONDON: BMW AG’s earnings fell in the first quarter after rising manufacturing costs weighed on the luxury-car maker’s profitability.

The German manufacturer’s automaking margin in the period dropped to 8.8% — within its target range but slightly below analyst expectations. It still confirmed its full-year guidance.

The results indicate car markets may remain challenging this year amid persistent inflation, a protracted recovery in China and muted economic growth in much of Europe.

Mercedes-Benz Group AG in April reported a drop in earnings on model changeovers and soft demand for electric vehicles, with Volkswagen AG and Stellantis NV also flagging slow starts to the year.

In a positive development, BMW cited a significant increase in deliveries of high-end models such as the BMW 7-Series sedan in the first quarter.

The company also outperformed its peers Mercedes and Audi on fully electric vehicles, with sales rising 28% amid robust demand for battery-powered models such as the i4 sedan and the iX1 sport utility vehicle.

The main BMW brand’s sales climbed 10% in Europe and dropped 4.1% in the key Chinese market, driven by lower volumes in the premium segment.

Overall revenue in the period was roughly flat at €36.6 billion (US$39.3 billion). BMW’s group earnings before interest and taxes fell by a quarter.