By David Sachs
German premium carmaker BMW is sticking to planned investments for its battery-powered future while holding onto its conventional gasoline-fueled roots, its technology chief said.
As sales of electric vehicles dip and carmakers reassess their transition investments and strategies, BMW is confident in its decision to invest heavily in what it still sees as a growth area, while continuing to champion conventional gas-burning cars.
"The positive thing is that we do not have to adapt our strategy, because we were always aware of how important it is to continue using all drive technologies," BMW Chief Technology Officer Frank Weber said in an interview. "And what's happening right now is not a surprise to us at all."
What is happening right now is a slowdown in sales of fully electric vehicles in key markets. Inflation-stricken consumers are opting for cheaper gas-burning and hybrid models as government subsidies fade and carmakers try to build affordable electric cars while protecting their margins, all amid fundamental shifts in technology and supply chains.
BMW recently canceled a 2 billion euro ($2.16 billion) battery contract with Swedish supplier Northvolt, which was supposed to produce the cells this year. Northvolt is now reassessing its growth strategy to ensure it can meet customers' needs, the company said.
Meanwhile, charging networks are patchy, which Weber said needs to change for full-scale electric-vehicle adoption. He added to his wishlist: suppliers with environmentally and financially sustainable processes--particularly battery makers, who need affordable, renewable electricity to produce battery cells and keep costs down.
"In this bigger system change, what was always clear is expectations were mounting too fast," Weber said.
Still, BMW views EVs as its primary growth driver. Its Munich factory will stop making gas-fired vehicles in 2027. In the first quarter of this year, it bucked the trend with a 28% increase in sales of battery-powered cars, to 82,700, while German rival Mercedes-Benz saw a 9% dip.
Yet the company has been less zealous than competitors about targeting phase-out dates of internal combustion engines, an approach perceived by some as a snub to a zero-emissions future.
"And I would call it a misinterpretation, because people thought by not mentioning that we would stop combustion engines by a certain year, we would not be committed to battery electric vehicles-that this would be like a detour," Weber said.
The ability for premium carmakers like BMW to sustain growth in the coming years will depend on the ability to provide given markets the powertrain they want, JPMorgan analysts said in a research note from June, adding that BMW is better positioned than its competitors here.
Weber's proof that BMW is in the EV express lane comes in the form of the Neue Klasse--an adaptable, physical and digital production platform that BMW is betting on to roll out its next-generation of software-first vehicles. The first electric model, a crossover SUV in the X3 segment, will roll off the line in Hungary next year. Every newly released model after that will receive the Neue Klasse tech treatment.
"Neue Klasse is a huge investment," said Weber, who has led the technical development of the platform. "It's a gigantic investment."
The biggest in BMW's history. While the company wouldn't break out the cost for Neue Klasse, its overall research and development expenses rose 14% to EUR7.54 billion last year, and jumped 27% on-year last quarter. The costs are primarily related to Neue Klasse, new models, the electrification and digitization of the vehicle fleet, and automated driving, a spokesman said. Investments are expected to peak this year.
Perhaps counterintuitively, the new electric-vehicle architecture will benefit conventional and hybrid cars, too. That is because the software behind sweeping digital panoramic windshield displays and hands-free driving in zero-emissions vehicles will also be used in gasoline-powered ones.
"Why is the automotive business an interesting field? Because it is not a single technology that is interesting," Weber said. "It is how the various technologies come together and create new product generations."
Write to David Sachs at david.sachs@wsj.com
(END) Dow Jones Newswires
July 04, 2024 08:54 ET (12:54 GMT)
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