BMW, the world's largest luxury carmaker, is considering plans to launch a new fuel-efficient model smaller than the Mini to counteract the impact of EU laws imposing tougher limits on carbon emissions.

The company is revising its strategy to cope with the EU's proposals to cut CO2 emissions to 120 grams a kilometre. The new "supermini" could be built outside Germany and the UK, home of the Mini.

Announcing a 13.6% fall in second quarter pre-tax profits to €1.07bn (£722m), Norbert Reithofer, chief executive, said that, through new fuel-efficient technologies, about 40% of BMWs and Minis sold in Europe would emit a maximum of 140g from this autumn. BMW is lobbying to mitigate the impact of the proposed EU legislation and to delay its introduction.

Mr Reithofer and Stefan Krause, finance director, blamed the fall in profits on the soaring euro and start-up costs for new models. The company said second quarter sales rose 8.6% to a new record of 397,000 units, with revenues up 11.3 % to €14.68bn.

In the first half pre-tax earnings were €1.92bn on revenues up 7.3% to €26.6bn. Mr Reithofer said that full year pre-tax profits would beat last year's record, from expected sales of 1.4 million vehicles.

Mini, which launches a new Clubman model this autumn, saw sales rise 6.4% in the first half to 107,576 and Rolls-Royce sold 294 vehicles.