BMW is a surprise winner in electric vehicles

As BMW bodies slid down the assembly line recently in Munich, engulfed in sparks from robotic welders, it was difficult to tell which vehicles would be powered by batteries, fuel engines or both. According to many analysts, that is not a good thing.

The German carmaker’s electric vehicles are made on the same assembly line as petrol cars and look the same from the outside. This approach, which uses the same basic body for electric, hybrid, gasoline and diesel cars, is seen as a difficult and inefficient compromise that some established automakers have adopted as they struggle to compete with Tesla and emerging Chinese automakers that produce cars exclusively are designed for batteries. current.

But what confuses the experts is that BMW’s strategy has paid off. The company sold 376,000 electric vehicles last year, including some under the Mini brand, a 75 percent increase from the previous year. In the luxury segment, BMW came second to Tesla, which remained dominant with 1.8 million cars. Electric vehicles accounted for 15 percent of BMW sales in 2023, up from 9 percent the year before.

The company’s growth comes as sales of electric vehicles around the world have increased at a slower pace. What’s even more surprising is that, unlike General Motors or Ford Motor, BMW made a profit on the electric vehicles it sold.

BMW’s experience suggests there is hope for at least some established automakers as Chinese automakers such as BYD begin exporting cars to other Asian countries, Europe and Latin America. As electric vehicles become increasingly popular, the popularity of BMW cars suggests that many buyers value the familiarity and craftsmanship of long-standing automakers and remain wary of newer brands.

If so, BMW’s approach could point the way to other automakers that have been producing cars for decades but have made little progress in the transition to battery-powered vehicles.

BMW’s strategy gave the company time to develop expertise in battery technology and design a line of cars that were specifically electric. It has helped the Munich-based company cope with fluctuations in demand as it can more easily ramp up or down production of different types of cars.

The approach also helped BMW retain customers who are interested in electric propulsion but are not ready for a sharp break with the past. The company offers hybrid versions of some of its most popular models and says buyers should be able to choose a car’s powertrain technology as easily as its color.

“We would lose our traditional customers if you told them, ‘You are part of the old world,’” BMW CEO Oliver Zipse said in an interview, referring to people who still preferred cars with combustion engine. “They would defect immediately.”

Next year, BMW will begin selling a new line of cars designed to run solely on batteries. Last month, at a company event at a location overlooking a rocky, wave-swept coastal area north of Lisbon, Mr. Zipse showed off prototypes of a sedan and a crossover SUV that are part of what the company calls the Neue Klasse. or New Class.

These cars will offer significant improvements over existing models, including batteries that store 20 percent more energy per pound, and features not available from Tesla, such as a digital display that runs along the entire bottom of the windshield.

The customizable display gives drivers speed, range, weather and navigation information without having to take their eyes off the road, and eliminates the need for an instrument cluster in front of the steering wheel. Most Teslas have one large display in the center of the dashboard, requiring drivers to look to the side to see maps and other information. That screen also contains many of the car’s controls.

In addition, the new BMWs will be available with autonomous driving technology that allows drivers to take their hands off the wheel on highways and change lanes just by looking in the side mirror. This feature directly challenges Tesla’s vaunted self-driving technology.

Ever since Tesla proved electric vehicles are practical and fun over the past decade, it has been an open question which car companies would rule the industry. Tesla, with roots in Silicon Valley, has led the way in software and battery technology but has struggled with production and introduction of new models. The established car companies had decades of experience in manufacturing, but faced a steep learning curve in batteries and software.

BMW is likely to survive this fraught transition to electric vehicles because of its technical expertise, strong brand and profit margins that have allowed the company to invest in new technology, says Matthew Fine, portfolio manager at Third Avenue Management, an investment firm that owns BMW. BMW shares.

“We thought this would give them a really good fighting chance,” Mr. Fine said. “And that seems to be true so far.”

The luxury car manufacturer started the transition to electric vehicles with certain advantages. The brand recently topped 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 significant advantages. A Tesla Model S, which starts at $75,000, can travel more than 400 miles on a charge, compared to about 320 miles for a BMW i7, which starts at more than $100,000, according to the Environmental Protection Agency. BMW said the next generation of cars should more than make up for that shortage with smaller batteries that offer 30 percent more range.

Tesla could be vulnerable in several areas. Shares of the company, which is led by Elon Musk, have lost more than half their value since their peak in 2021. BMW shares are up about 17 percent over the same period. Wall Street still values ​​Tesla at more than eight times BMW’s stock market value.

Tesla’s lineup is getting dated by automotive standards. The company recently started selling an upgraded version of its Model 3 in the United States, but hasn’t introduced a completely redesigned sedan or SUV since 2020. Tesla produces its latest model, the Cybertruck, which was launched last year, in limited editions. Numbers.

“Newcomers,” Mr. Zipse said without naming Tesla, “if they are not careful, they may grow old before they reach adulthood.”

A ride in an i7, an electric incarnation of BMW’s flagship sedan popular with politicians and business executives, offers a lesson in the comfort that’s crucial to the company’s appeal. The car, which looks almost identical from the outside to its internal combustion counterpart, is eerily quiet even at highway speeds. The car comes with a large video screen that folds down from the ceiling.

Mr Zipse states that BMW is not just a car manufacturer. “BMW, yes, it’s a car company,” he said. But he added: “At its core, it is a technology company that has the ability to integrate very different technologies into one product.”

In Munich, BMW is demolishing buildings used to produce combustion engines to make room for assembly lines that will produce 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 also sells to Tesla but develops its own technology. In a building with blue and gray corrugated iron walls in the Munich suburb of Parsdorf, BMW operates a mini-factory where it tests new battery designs and production processes. One change means that a slurry containing lithium and other active ingredients may be mixed in a continuous stream rather than in batches, which is now the conventional practice. The process is faster and cheaper.

From 2027, BMW will produce only electric vehicles in Munich, although it will continue to produce models with combustion engines at other plants. The company has major factories in Shenyang, China; Spartanburg, SC; and other locations in Europe. BMW has said it will begin producing electric vehicles in the United States by the end of the decade.

Unlike Audi and other competitors, Mr. Zipse has refused to put an expiration date on internal combustion engines, drawing criticism from environmental groups.

“BMW could lead the European car industry in the transition to electric vehicles if it made a clear commitment to ending the production of combustion engines that harm the climate,” said Benjamin Stephan, a transportation expert at Greenpeace in Germany, in an e-mail. -mail.

But Mr Zipse said the future of the industry is clearly electric. Sales of BMWs with engines have remained steady, he noted. “The fastest growing segment is electromobility,” said Mr Zipse. Electric vehicles, he added, “will be a dominant market force.”

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