BERLIN, May 6 (Reuters) - German luxury carmaker BMW reported a sharp drop in first-quarter profit, hit by intense competition in China and tariff pressures that negatively impacted its performance, but for now it has maintained its outlook for 2026.

The company said on Wednesday that quarterly profit before taxes plunged 25 percent to 2.3 billion euros ($2.70 billion), slightly above analysts' expectations of 2.2 billion euros.

The group's revenues fell short of expectations, declining 8.1 percent to 31 billion euros.

Mercedes-Benz and Audi also announced a difficult start to 2026, amid looming concerns about higher US tariffs, at a time when Chinese rivals are consolidating their dominance in the world's largest car market as they begin to increase their market share in Europe.

Like many automakers, BMW is cutting costs to offset the pressures of tariffs and rising raw material costs in a sluggish global car market. But unlike other companies, it has managed to do so without laying off workers.

BMW's profit margin before interest and taxes in its core automotive business was 5 percent in the first quarter, down from 6.9 percent a year earlier but higher than analysts' expectations of 4.7 percent.

The company maintained its full-year outlook on Wednesday, forecasting a slight decline in the group's financial results. The company's underlying operating profit margin is expected to range between four and six percent, down from 5.3 percent in 2025.

However, this forecast does not take into account a potential increase in US tariffs on automobiles, after US President Donald Trump threatened on Friday to raise them to 25 percent from 15 percent. It also assumes, as stated in the company's announcement, that the conflict in the Middle East "will not be ongoing."

(US$1 = €0.8522)