As the bodies of BMW cars slid down an assembly line in Munich recently, bathed in sparks from robotic welders, it was difficult to say which vehicles would be powered by batteries, fuel-burning motors or both. In the opinion of many analysts, this is not a good thing.
The German automaker's electric vehicles are manufactured on the same assembly line as gasoline cars and have a similar exterior appearance. That approach — using the same basic bodywork for electric, hybrid, gasoline and diesel cars — has been seen as an awkward and inefficient compromise that some established automakers have implemented as they struggle to compete with Tesla and emerging Chinese automakers. that produce cars designed exclusively to run on batteries. force.
But, to the surprise of experts, BMW's strategy has paid off. The company sold 376,000 electric vehicles last year, including some from its Mini brand, a 75 percent increase from the previous year. In the luxury segment, BMW is second only to Tesla, which remains dominant with 1.8 million cars. Electric vehicles accounted for 15 percent of BMW sales in 2023, up from 9 percent the previous year.
The company's growth comes as sales of electric vehicles have increased at a slower pace around the world. What's even more surprising is that BMW, unlike General Motors or Ford Motor, made a profit on the electric vehicles it sold.
BMW's experience suggests there is hope for at least some established automakers as Chinese manufacturers like BYD begin exporting cars to other Asian countries, Europe and Latin America. As electric vehicles become more widespread, the popularity of BMW cars suggests that many buyers value the familiarity and workmanship of long-standing automakers and remain cautious of newer brands.
If so, BMW's approach could show a path to other automakers that have been making cars for decades but have made little progress in transitioning to battery-powered vehicles.
BMW's strategy gave the company time to develop expertise in battery technology and design a line of specifically electric cars. It has helped the Munich-based company cope with fluctuations in demand because it can more easily increase or reduce production of different types of cars.
The approach also helped BMW retain customers interested in electric propulsion but not ready for a sharp break with the past. The company offers hybrid versions of several of its most popular models, saying buyers should be able to choose a car's powertrain technology as easily as choosing its color.
“We would lose our traditional customers if you said, 'You are part of the old world,'” Oliver Zipse, BMW's chief executive, said in an interview, referring to people who still preferred combustion-engine cars. “They would desert immediately.”
Next year, BMW will begin selling a new line of cars designed to run solely on batteries. Last month, at a company event on a site overlooking a rocky, wave-swept stretch of coastline north of Lisbon, Zipse showed off prototypes of a sedan and a crossover sport-utility vehicle that are part of what the company called 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 Tesla doesn't offer, such as a digital display that runs along the entire bottom edge of the windshield.
The customizable display provides drivers with speed, range, weather and navigation information without having to take their eyes off the road, eliminating the need for an instrument cluster in front of the steering wheel. Most Teslas have a large screen in the center of the dashboard, requiring drivers to look to the side to see maps and other information. That screen also has many of the car's controls.
Additionally, new BMWs will be available with autonomous driving technology that will allow drivers to take their hands off the wheel on highways and change lanes by simply looking in the side mirror. That feature directly challenges Tesla's much-vaunted self-driving technology.
Since Tesla proved over the last decade that electric vehicles were practical and fun, the question of which car companies would dominate the industry has been left open. Tesla, with roots in Silicon Valley, has been a leader in software and battery technology, but has struggled with manufacturing and introducing new models. Established car companies had decades of manufacturing experience, but faced a steep learning curve with batteries and software.
BMW is likely to survive this difficult transition to electric vehicles thanks to its engineering expertise, strong brand and profit margins that have allowed the company to invest in new technology, said Matthew Fine, portfolio manager at Third Avenue Management. , an investment firm that owns BMW Stock.
“We thought that would give them a really good fighting chance,” Fine said. “And that seems to have been true so far.”
The luxury automaker began the shift toward electric vehicles with certain advantages. The brand recently topped Consumer Reports Car Brand Rankings that manufacture the best vehicles for the second consecutive year. Tesla ranked 18th out of the 34 brands on the list.
But Tesla has important advantages. A Tesla Model S, which starts at $75,000, can go more than 400 miles on a charge, according to the Environmental Protection Agency, compared to about 320 miles for a BMW i7, which starts at more than $100,000. BMW said its next generation of cars should more than erase that deficit with smaller batteries that provide 30 percent more range.
Tesla could be vulnerable in several areas. Shares of the company, led by Elon Musk, have lost more than half their value since their peak in 2021. BMW shares have gained about 17 percent in the same period. Wall Street still values Tesla at more than eight times BMW's stock market value.
The Tesla range is becoming dated by automotive standards. The company recently began selling an upgraded version of its Model 3 in the United States, but has not introduced a completely redesigned sedan or SUV since 2020. Tesla is producing its newest model, the Cybertruck, which went on sale last year. , in limited quantities. numbers.
“Newcomers,” Zipse said without mentioning Tesla, “if they're not careful, they could grow old before they grow up.”
A ride in an i7, an electric incarnation of BMW's high-end sedan popular with politicians and corporate executives, offers a lesson in the creature comforts that are crucial to the company's appeal. The car, which from the outside appears almost identical 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 roof.
Zipse maintains 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 a single product.”
In Munich, BMW is demolishing buildings that were used to produce internal combustion engines to make way 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 such as China's CATL, which also sells to Tesla, but develops its own technology. In a building with blue and gray corrugated metal walls in the Munich suburb of Parsdorf, BMW operates a mini-factory where it tests new battery designs and manufacturing processes. One change involves allowing a suspension containing lithium and other active ingredients to be mixed in a continuous stream rather than in batches, as is current conventional practice. The process is faster and cheaper.
From 2027, BMW will only produce electric vehicles in Munich, although it will continue to make internal combustion engine models in other factories. The company has large plants in Shenyang, China; Spartanburg, South Carolina; and other places in Europe. BMW has said it will begin making electric vehicles in the United States by the end of the decade.
Unlike Audi and other competitors, Zipse has refused to put an expiration date on internal combustion engines, drawing criticism from environmental groups.
“BMW could lead the European auto industry in the transition to electric vehicles if it made a clear commitment to ending the production of climate-damaging internal combustion engines,” Benjamin Stephan, a Greenpeace transportation expert in New York, said in an email. Germany.
But Zipse said the future of the industry is clearly electric. Sales of powered BMWs have stagnated, he noted. “The fastest growing segment is electromobility,” Zipse said. Electric vehicles, he added, “will be a dominant force in the market.”.”
