BERLIN, May 8 (Reuters) - BMW said on

Wednesday it expects a slight drop in pre-tax profit this year

due to higher research and development, manufacturing and

personnel costs, with a decrease in used car prices also

contributing to the decline.

The Munich-based automaker reported a fall in its

first-quarter profit margin in its automotive segment as

persistently higher costs weighed on its bottom line and demand

for luxury cars in China remained muted.

The German premium automaker's pre-tax margin in the car

segment fell to 8.8% from 12.1% a year earlier and below the

9.2% expected by analysts in a company-compiled consensus.

First-quarter revenue dropped slightly despite a 1.1%

increase in car sales.

During the pandemic supply chain shortages meant automakers

were able to charge higher prices for their vehicles and were

able to sell cars coming off lease for more because of strong

demand for used cars.

BMW is investing heavily in electric vehicles and model

revamps across its line-up and expects record spending this

year, up from 7.5 billion euros last year.

"This year, it will be more important than ever to maintain

our strategic course," Chief Financial Officer Walter Mertl said

in a statement. "The investments needed in the digital and

electric future of our company are the highest they have ever

been."

BMW rivals Mercedes Benz and Porsche

are also spending heavily as Germany's automakers try to tackle

growing competition in the EV market from China and Tesla

.

First-quarter group pre-tax profit fell 18.9% to 4.1 billion

euros ($4.40 billion) but beat the 3.9 billion expected by

analysts.

Sales of fully electric cars rose 28% to 83,000 vehicles in

the quarter.

($1 = 0.9313 euros)