BMW CEO's strategy puts focus on electric, luxury vehicles

[MUNICH] BMW AG plans to roll out more electric cars and add self-driving features faster than rivals to help fend off growing threats to its status as the world's biggest maker of luxury vehicles.

The German carmaker will also roll out more sport-utility vehicles including the full-sized X7 as well as more versions of high-end models like the 7-Series sedan, the Munich-based company said Wednesday in a statement.

The two-pronged approach is the centerpiece of a strategy review by Chief Executive Officer Harald Krueger and is aimed at maintaining pretax profit margins at a minimum of 10 per cent through 2020.

A decade after taking the top spot in the global luxury-car market, BMW is at a crossroads. Years of rolling out new models ranging from coupe-like sport utility vehicles to seven-seat wagons have left the company with few niches that could spur growth.

Rival Daimler AG has a chance to reclaim the crown as early as this year after catching up to BMW with a slew of new models and upgrades of its bestsellers.

"We need to manage our current business to perfection, while continuing to grow in a targeted fashion, in order to secure the necessary investment," Mr Krueger said in the statement.

BMW rose as much as 2.32 euros (S$3.55), or 2.9 percent, to 81.88 euros (S$125.38), and traded at 81.68 euros at 10.14 am in Frankfurt. The stock has lost 17 per cent this year, compared with 13 per cent decline at Daimler in the period.

The carmaker's last major strategic shift was in 2007, when then-CEO Norbert Reithofer pushed the sporty brand to invest billions to reduce fuel consumption, produce its first electric vehicle and pioneer the mass production of carbon fiber.

Mr Krueger said Thursday he'll add open-top versions of the i8 plug-in, while also broadening the range of cars that come with the optional M-high-performance packages.

Unlike rivals Mercedes-Benz and Audi, the owner of the BMW, Rolls-Royce and Mini brands isn't part of a broader group, meaning it has to absorb the costs of developing these new technologies on the strength of its current offering.

Growth though is slowing as Daimler AG's Mercedes and Volkswagen AG's Audi push for the No 1 spot, and brands including Maserati, Jaguar and Alfa Romeo expand to give luxury-car buyers more options.

"There's not much they can do in terms of adding more products," Dominic O'Brien, a London-based analyst with Exane BNP Paribas, said before BMW released the strategy report.

"The three key themes of emissions reduction, connected cars and autonomous driving will keep spending on research and development at an elevated level."

BMW predicted another year of record sales volumes, revenue and earnings, while group earnings will rise only slightly this year, compared with a forecast of solid growth last year.

Revenue from the automaking segment will grow slightly, the company said, compared with a significant increase last year.

BMW's focus on conserving its resources was evident in its decision to refrain from an expected special payout for investors this year, as the company celebrates its 100th anniversary.

In addition to battling its traditional rivals, BMW also faces the emergence of new competitors like Tesla Motors Inc and potentially Apple Inc.

The German carmaker outlined its view of future luxury autos last week when it presented a concept vehicle where the steering wheel and center console retract, enabling the driver to turn to face the front passenger.

"We need to act swiftly in the digital world and be prepared to take risks," said Mr Krueger.

BLOOMBERG