MUNICH (Reuters) -BMW is confident it can return to growth in its largest market China with the all-electric Neue Klasse series, a major overhaul of the company's portfolio that was kick-started this week with the launch of its first model.

"We are more than competitive with this product," Chief Financial Officer Walter Mertl told Reuters. "With increasing availability of the Neue Klasse, we will see growth in China again."

Like its European peers, BMW has suffered setbacks in China due to aggressive local competition and a real estate downturn that has put wealthy Chinese consumers off buying new cars.

In the first half of 2025, China sales at the German luxury carmaker slumped by 15.5%.

"Looking at our future model range, I'm not worried," Mertl said, after BMW took the wraps off its Neue Klasse iX3 electric sport utility vehicle on Friday, which will launch in China by summer 2026.

The launch took place ahead of the 2025 IAA car show in Munich, where local car brands are battling with a growing Chinese presence to remain competitive.

Batteries in the new vehicles were between 40% and 50% cheaper than those in existing models, Mertl said, a key factor in helping the group boost profitability.

With the iX3 50, BMW could achieve margins equal to combustion engine equivalents -- so-called margin parity -- already in 2026, Mertl said.

BMW expects an automotive EBIT margin of 5% to 7% in 2025 and Mertl said the goal was to raise that to 8% to 10% in the future.

The company plans to phase out its old models by the end of the decade with the roll-out of the Neue Klasse series.

Turning to import tariffs in the United States, where BMW has its biggest production plant, Mertl reiterated that the duties would drag BMW's profit margin down by 1.25 percentage points in 2025.

The European Union plans to remove duties on imported U.S. industrial goods in return for a U.S. tariff rate of 15% on European cars - down from the current 27.5% - which automakers hope will apply retroactively from August 1.

(Writing by Rachel More; Editing by Christoph Steitz: Editing by Sharon Singleton)