German carmaker BMW said Thursday that net profits fell 3.6 percent in 2003 from the previous year's record earnings. Profits dropped to €1.947 billion ($2.414 billion) from €2.020 billion in 2002. The company said the downswing was due to rising costs connected to changes in Germany's early retirement law and differences in corporate tax credits. The southern German carmaker also said it had increased expenses related to the launch of several new models, including a new version of its mainstay 5-series. Despite the drop in profits, chief executive officer Helmut Panke said the company met all its targets and was on track for "positive development in the current financial year by increasing sales volumes and earnings." With its focus on more expensive models, BMW has managed to survive a slump in consumer demand for European autos better than the larger German carmakers DaimlerChrysler and Volkswagen, who have focused efforts on producing for the highly competitive mid-price range. BMW was also better equipped to shield itself from the effects of the strong euro by producing key models at its U.S. plant in South Carolina.