On Thursday, March 12, BMW Reports First Annual the largest maker of premium cars in the world, reported a drop of 78 percent for its group earnings before interest and taxes, news that sent the company's stock down 12 percent.

The reported earnings figure of 921 euros or $1.18 billion fell substantially under the projected 1.54 billion euros, a figure arrived at by 20 analysts surveyed in a Reuters poll.

After taking a 1.06 billion euro write-down for cars coming out of lease arrangements and for bad debts, BMW has proposed cutting its 2008 common stock dividend from 1.06 euros to 0.30 euros.

Models like BMW's Z4 roadster fell sharply in demand in the last quarter of 2008, leading to the company's first annual profit drop since 1993. Like its rival Mercedes-Benz, BMW made money for years from attractive lease deals that were highly popular in the U.S.

With credit drying up, however, the market for such premium offerings has fallen sharply, leaving analysts to ponder the true potential of a premium market that may not actually exist.

Additionally, both Mercedes and BMW are facing heavy research and development burdens as they struggle to meet the increasingly stringent requirements of emissions laws that have forced the carmakers to replace their heavier engines.