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UPDATE 1-BMW second quarter hit by rising costs of manufacturing, emissions

* BMW Q2 falls 20% despite higher vehicle sales

Says car sales to improve in H2

* Says cost of complying with emissions rules hits margins (Adds detail)

By Edward Taylor

FRANKFURT, Aug 1 (Reuters) - BMW stuck to its outlook even as second-quarter earnings fell 20%, hit by currency headwinds and the rising cost of manufacturing electric and hybrid cars to help the carmaker meet stricter emissions limits. The company said its earnings before interest and taxes (EBIT) fell to 2.2 billion euros ($2.4 billion) in the quarter as stricter carbon emission legislation due in 2021 forces carmakers to invest to build lower-emission vehicles.

Investments in property, plant and equipment rose 39 percent in the quarter as BMW retooled factories to build new models, and more flexible production lines to make both electric and combustion-engined vehicles, the carmaker said.

The Munich-based company said the operating margin at its automotive division fell to 6.5% from 8.6% a year earlier, despite a 1.5% rise in vehicle sales during the same period.

BMW reiterated it expects a significant decrease in group profit before tax in 2019 as well as a slight increase in vehicle deliveries, and an EBIT margin of between 4.5% to 6.5% in the automotive division.

Rival Daimler lowered its outlook, while peers Fiat Chrysler and Volkswagen stuck to their guidance for 2019, as a global trade war hits consumer confidence and contributes to falling demand, particularly in China.

($1 = 0.9055 euros) (Reporting by Edward Taylor Editing by Thomas Seythal and David Holmes)