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BMW bosses to skip Paris show to thrash out electric car strategy
[FRANKFURT] BMW's management board is skipping the Paris Motor Show to hold talks aimed at breaking a deadlock over whether to produce new electric cars, including a battery-powered Mini, sources familiar with the matter told Reuters.
Spurred on by the success of US rival Tesla, which has received almost 400,000 pre-orders for its Model 3 car, German carmakers Mercedes-Benz and Volkswagen have accelerated their own electric car programmes.
VW, for example, has said it plans to launch more than 30 electric vehicles over the next decade, forecasting they would account for about a quarter of group deliveries by 2025.
Executives across the industry predict electric cars will increasingly gain mainstream acceptance among customers thanks to advances that make batteries get cheaper and more powerful and the VW emissions scandal, which has sparked a regulatory backlash against diesel-engine vehicles.
But BMW has been torn about whether to accelerate development of new electric cars, given its expensive early investments into the area which resulted in only lacklustre sales of its i3, which saw only 25,000 deliveries last year.
Norbert Reithofer championed the i3 project while chief executive of the Munich-based carmaker and, in his new role as chairman, is keeping up pressure on new CEO Harald Krueger and BMW management to expand the company's electric programme.
But some other senior executives are unwilling to plough more resources into electric cars until i3 sales improve and there is a clearer business case for such investment, according to one of the four sources, who declined to be named because of the confidential nature of the discussions.
Most of BMW's eight-strong management board - including the CEO and chief financial officer - traditionally attend the closed-door press and executive days of the biennial Paris Motor Show for one of the biggest industry gatherings of the calendar.
But this year only Ian Robertson, board member for sales and marketing, will be at the show, while the rest will instead attend a company strategy meeting at the end of September, according to the sources.
Board members will attempt to reach agreement on the carmaker's electric car strategy, including whether to build an electric Mini, said the sources.
BMW declined to comment.
BMW's car division has delivered a return on sales above 8 per cent for 25 quarters in a row, a track record that the new management does not want to blemish, even as heavy investments into ride-hailing services loom.
"How does the company expand into the loss-making segment of electric cars and retain its industry-leading profitability. That's essentially the question facing management now," said another of the sources.
The carmaker recently revamped the i3 by giving it a new battery with greater range, a step which has given a boost to sales.
After years of pushing back a decision on an electric Mini, many BMW managers are now warming to the idea, the sources said, given that governments are clamping down on pollution and offering subsidies for zero-emissions vehicles and charging infrastructure.
"The question is: what alternative is there," said another person familiar with BMW's thinking, who declined to be named.
Those managers in favour want to have an electric Mini ready for 2019, the sources said, but to build one BMW needs to find a Mini vehicle platform which can accommodate a battery, and to make multi-million euro investments to convert factories to build electric cars.
It is too expensive to rework the i3's platform to suit a Mini, one of the sources said, since costs of reengineering would probably make it even more expensive than the i3 which costs in excess of 40,000 euros.
Senior managers fear they will not recoup the investment costs with Mini-branded cars because these do not command the same sticker prices as BMW-labelled cars, another of the sources said.
BMW is already working on a mid-sized electric "crossover" vehicle.
One way to compensate for lower profits from smaller cars would be to expand the range of large luxury and M-branded performance cars, the source said. BMW is considering building a model priced above its 7-series flagship to capture a segment of ultra-wealthy clients who are buying the likes of Mercedes Maybach models, another source said.
BMW will also discuss how best to retain staff, after suffering high-profile defections, including a member of the electric cars development team.
One of them was Carsten Breitfeld, the former head of the i8 programme, who defected to Chinese electric vehicle maker Future Mobility Corporation in July 2016 because he felt BMW had lost some momentum in the area of electric cars.
"I worked in BMW i for some years and we did some new things," Breitfeld told Reuters in China. "After doing this first step BMW stepped back and waited for what would happen in the market." The cumbersome process of getting things approved was one of the key frustrations, Breitfeld said, adding that at Future Mobility Corporation he can get 10 people in the room who handle all the key areas and immediately make a decision. "The same thing in a big corporation takes half a year because it's not 10 people you have to talk to, it's 500 people."