Recently, as BMW bodies glided down Munich's assembly lines, spitting sparks from robotic welders, it was difficult to tell which cars would be powered by batteries, fuel-burning engines, or both. In the view of many analysts, this is not a good thing.
The German automaker's electric cars are made on the same assembly line as gasoline cars and look similar. This approach of using the same basic body for electric, hybrid, gasoline and diesel cars is an awkward and inefficient compromise that some established automakers have deployed to compete with Tesla and emerging Chinese automakers that produce cars designed exclusively for batteries. has been considered. strength.
But BMW's strategy of confounding experts paid off. The company sold 376,000 electric vehicles, including some of its Mini brands, last year, a 75% increase from the previous year. In the luxury segment, BMW ranked second with 1.8 million cars, behind Tesla, which still maintains its dominant position. Electric vehicles will account for 15% of BMW sales in 2023, a significant increase from 9% the previous year.
The company's growth comes as electric vehicle sales grow at a slow pace globally. What is even more surprising is that, unlike General Motors (GM) or Ford Motor Company, BMW made a profit from the electric vehicles it sold.
BMW's experience suggests there is hope for at least some established automakers as Chinese automakers like BYD begin exporting their cars to other Asian countries, Europe, and Latin America. As electric vehicles enter the mainstream, the popularity of BMW cars suggests that many buyers value the familiarity and technology of long-standing automakers and are wary of new brands.
If so, BMW's approach could show the way for other automakers that have been producing cars for decades but have made little progress in transitioning to battery-powered vehicles.
BMW's strategy has bought time for the company to develop expertise in battery technology and specifically design a line of electric vehicles. This has helped the Munich-based company cope with fluctuations in demand because it can more easily scale up or down production of different types of cars.
This approach has also helped BMW retain customers who are interested in electric propulsion but aren't ready for a drastic change from the past. The company offers hybrid versions of several of its most popular models, saying buyers should be able to choose their car's propulsion technology as easily as they choose its color.
“If you tell them, ‘You are part of the old world,’ we will lose our traditional customers,” BMW CEO Oliver Zipse said in an interview, referring to those who still prefer internal combustion engines. “He said. “They will defect immediately.”
Next year, BMW will begin selling a new line of cars designed to run solely on batteries. At a company event last month at a site overlooking the rocky, wave-lashed coast north of Lisbon, Mr. Zipse showed off prototypes of a sedan and crossover sport utility vehicle, part of a fleet of vehicles the company calls Neue Klasse. Or a new class.
The car offers significant improvements over the existing model, including features not available in Tesla, such as a battery that stores 20 percent more energy per pound and a digital display that runs along the entire bottom edge of the windshield.
The customizable display provides information on speed, range, weather and navigation without the driver having to take their eyes off the road, eliminating the need for an instrument cluster in front of the steering wheel. Most Teslas have one large display in the center of the dashboard, forcing drivers to look to the sides to see maps and other information. That screen also contains many of the car's controls.
Additionally, the new BMW will also be equipped with autonomous driving technology that will allow drivers to change lanes on the highway just by taking their hands off the steering wheel and looking at the side mirrors. This feature directly challenges Tesla's vaunted self-driving technology.
After Tesla spent the past decade proving that electric cars are both practical and fun, it's been an open question which automaker will dominate the industry. With its roots in Silicon Valley, Tesla has been a leader in software and battery technology, but has struggled to manufacture and launch new models. Established auto companies have decades of experience in manufacturing, but the learning curve for batteries and software has been steep.
BMW is likely to survive this difficult transition to electric vehicles thanks to its engineering expertise, strong brand and profit margins that allow it to invest in new technologies, said Matthew Fine, portfolio manager at Third Avenue Management, the investment firm that owns BMW. said. BMW stock.
“We thought it would give them a very good fighting chance,” Mr. Fine said. “And so far, I think that’s been true.”
Luxury car manufacturers have begun the transition to electric vehicles, which come with certain advantages. The brand recently ranked first in Consumer Reports' ranking of auto brands that make the best vehicles for the second year in a row. Tesla ranked 18th out of 34 brands on the list.
But Tesla has a significant advantage. According to the Environmental Protection Agency (EPA), a Tesla Model S starting at $75,000 can travel more than 400 miles on a single charge, while a BMW i7 starting at well over $100,000 can travel about 320 miles . BMW says its next-generation car should do more than address this deficit with smaller batteries that offer 30 percent more range.
Tesla may be vulnerable in several areas. The stock price of the company led by Elon Musk has lost more than half its value since peaking in 2021. During the same period, BMW stock prices rose about 17%. Wall Street still values Tesla at more than eight times the stock market value of BMW.
Tesla's lineup is becoming outdated by automotive standards. The company recently began selling upgraded versions of the Model 3 in the U.S., but it hasn't introduced a completely redesigned sedan or SUV since 2020. Tesla is producing a limited edition of its latest model, the Cybertruck, which went on sale last year. number.
Mr. Zipse referred to Tesla as a “newcomer,” without mentioning it. “If you’re not careful, you might grow old before you grow up.”
When you drive the i7, an electrified version of BMW's top-of-the-line sedan popular with politicians and business executives, you can feel the comfort that is crucial to the company's appeal. This car, which looks almost identical to an internal combustion engine car, is strangely quiet even on the highway. The vehicle comes with a large video screen that folds down from the ceiling.
Mr. Zipse argues that BMW is more than just a car manufacturer. “BMW is like that. “It’s a car company,” he said. But, he added, “it is essentially a technology company with the ability to integrate very different technologies into one product.”
In Munich, BMW is demolishing a building used to produce internal combustion engines to make room for an assembly line that will produce its Neue Klasse cars. The last V-8 rolled off the assembly line last year.
BMW buys most of its batteries from suppliers like China's CATL, which sells to Tesla, but develops its own technology. BMW operates a mini-factory where it tests new battery designs and manufacturing processes in a building with blue and gray corrugated metal walls in the Munich suburb of Passdorf. One change would be to allow slurries containing lithium and other active ingredients to be mixed in a continuous flow rather than in batches, which is now traditional practice. The process is faster and cheaper.
BMW will produce only electric vehicles in Munich from 2027, but will continue to produce internal combustion engine models at other plants. The company has a large factory in Shenyang, China. Spartanburg, South Carolina; And other parts of Europe. BMW says it will begin production of electric vehicles in the United States by the end of 2010.
Unlike Audi and other competitors, Mr. Zips refuses to put expiration dates on its internal combustion engines, drawing criticism from environmental groups.
“BMW could lead the European car industry in the transition to electric vehicles if it makes a clear commitment to stop producing climate-damaging internal combustion engines,” Benjamin Stefan, a transport expert at Greenpeace Germany, said in an email.
But Mr Zipse said the future of the industry was clearly electric vehicles. He pointed out that sales of BMWs with the engine have plateaued. “The fastest growing segment is electric vehicles,” Mr. Zipse said. “Electric vehicles will become the dominant market force,” he added..”