* Q2 net profit 121 mln eur vs poll avg for 25 mln eur loss

* Q2 vehicle sales down 18 percent from year-earlier

* Automotive segment posts Q2 EBIT loss

* Shares fall 1.7 percent

BMW (BMWG.DE) will launch a new class of environmentally friendly vehicles under its own brand, signalling that even premium automakers are ready to embrace electric vehicles as a mainstream product.

The push comes on the same day as BMW unveiled better-than-expected second-quarter earnings and as governments increasing seek to sponsor the buying of smaller cars which pollute less. [ID:nN272145] [ID:nL4358254] [ID:nLQ111293]

Without new concepts and technologies, certain carmakers may no longer be in the market soon after the advent of a raft of tax penalties and incentives designed to force the auto industry to go green, Chief Executive Norbert Reithofer said.

BMW's board decided to create a new sub-brand -- akin to its performance M moniker -- to label a new range of sustainable vehicles, Reithofer said on a conference call on Tuesday.

The new class of vehicles could include a two-wheel model and will target commuters in large cities, BMW said.

Previous plans to consider adding a fourth brand to the group's existing Rolls-Royce, BMW and Mini marques had been put to rest, BMW said, adding the first vehicle to be launched under the new drive will be an electric car.

BMW posted second-quarter earnings before interest and taxes (EBIT) of 169 million euros ($243.2 million), better than the 42 million euro average analyst estimate in a Reuters poll.

But the quarterly EBIT figure was below the year-earlier level of 425 million euros due to months of falling unit sales and a collapse in profitability at BMW's core automotive segment.

The auto business recorded a 31 million euro loss before interest and taxes in the second quarter, compared with a EBIT of 395 million in the year-earlier period. BMW said the EBIT margin at its core automotive segment in the second quarter narrowed to a negative 0.3 percent from a negative 2.6 percent at the end of the first quarter.

BMW declined to give a forecast for 2009, saying a lasting and wide-ranging recovery is not yet in sight despite some encouraging signs. It reiterated it aims to achieve an EBIT margin of 8-10 percent in the automobiles segment by 2012.

BMW and rival Daimler (DAIGn.DE) already have electric vehicles bearing the Mini and Smart brands and offer hybrid cars.

But both premium automakers have so far avoided offering electric vehicles under the BMW and Mercedes-Benz brands even as mainstream rivals Nissan Motor Corp (7201.T), Toyota Motor Corp (7203.T) and Volkswagen AG (VOWG.DE) have announced plans to launch own-brand electric cars in the next several years.

BMW's latest move in to electric cars comes in addition to a separate move by the Munich-based automaker to trim fuel consumption in its larger limousines and sports utility vehicles.

Electric vehicles have so far proven to be a niche product due to technological limitations that prevent the cars from covering long distances on a single charge. Another factor limiting the appeal of electric vehicles is a long charging time with the current battery technology.

(Reporting by Edward Taylor, editing by Jason Neely)