IHS Global Insight Perspective | |
Significance | BMW and PSA Peugeot-Citroën have signed a memorandum of understanding to extend their alliance to encompass the development of components for front-wheel drive hybrid and EV vehicles. |
Implications | The MoU signals an extension of the existing partnership between PSA Peugeot-Citroën and BMW in which the two companies collaborate on the design, development and manufacture of 1.4- and 1.6-litre turbocharged gasoline engines. IHS Automotive has predicted that BMW would increasingly engage in a range of technical development alliances to improve economies of scale and reduce costs. |
Outlook | This extension of the existing relationship between BMW and PSA may even lead to a further enhanced relationship similar to the alliance between Daimler and Renault-Nissan which is set to take in the joint development of A-segment cars and a comprehensive powertrain-sharing strategy. |
BMW and PSA Peugeot-Citroën have announced that they have signed a memorandum of understanding (MoU) to extend their alliance which will see the two companies collaborate on the development and production of hybrid components for front-wheel drive (FWD) vehicles. According to a joint company press release, the MoU has been signed by the chairman of BMW's board of management Norbert Reithofer and his equivalent at PSA, Philippe Varin. Commenting on the MoU Reithofer said, "This cooperation will deliver a major contribution towards a competitive cost structure in the field of electrification. It also represents another important step on the road to sustainable mobility." Varin added, "We are pleased to broaden our long-standing cooperation based on the strong relationship that exists between our two companies... Combining both partners' expertise in hybrid technologies will clearly create competitive advantage." No financial information regarding the extended alliance was disclosed.
The press release claimed that the alliance would specifically encompass components to be used "in front-wheel drive vehicles with electrified drive trains." This would appear to encompass components used in hybrid and pure electric vehicles (EVs). These kind of components would logically be used in smaller vehicles such as BMW's forthcoming Megacity city car and the Peugeot iOn EV and the Citroën C1 ev'ie EV, as well as front-drive hybrids which both OEMs could develop in the future based on vehicles like the forthcoming front- wheel drive BMWs, next generation BMW Mini, and all Peugeot's mainstream model range, including the new D1 segment 507. The MoU has paved the way for BMW and PSA to collaborate on the joint development, production and purchasing of these components, with both companies looking to generate enhanced economies of scale in sourcing hi-tech, and therefore cost-intensive, components. It will also allow both partners to standardise sizeable elements in the electrification of their vehicle ranges.
BMW and PSA have already been successfully co-operating on engines for several years, originally signing a deal to develop and manufacture turbocharged gasoline (petrol) engines, with production starting in 2006. In February 2010, the two companies agreed to develop the next generation of this powertrain (see France - Germany: 3 February 2010: BMW and PSA Extend Engine Manufacturing Alliance, Discuss Further Co-Operation), which is used in the BMW Mini range and across the PSA model portfolio. The new powertrain will also meet Euro-VI requirements and is likely to find its way into the new FWD BMW models.
Outlook and Implications
The extension of the BMW-PSA alliance in the direction of collaborating on the development, purchasing and development of components for hybrid and pure EVs makes perfect sense and is likely to be rolled out further across the industry. These kind of alliances will be necessary to accelerate the electrification of the automotive industry and they will be vital in integrating economies of scale, especially in the early stages of the mass roll-out of EVs and hybrids, when low initial volumes will mean substantial entry costs to OEMs at the forefront of introducing the technology. The OEM with perhaps the most daring and advanced electrification strategy is the Renault–Nissan alliance. In April, Renault-Nissan announced its own alliance with Daimler (see Germany - France: 7 April 2010: Renault and Daimler Confirm Alliance, Co-Operation on Smart ForTwo and Renault Twingo Planned) which saw both companies take a 3.1% cross holding in each other. A key component of this strategy was to share the development costs of the next generation Smart ForTwo and Renault Twingo A-segment, and the EV versions of these vehicles, as well as what was described at the time as "Additional synergies encompassing selective common purchasing opportunities".
Both Renault-Nissan and Daimler will be hoping to generate significant cost savings and economies of scale in their vehicle electrification strategies through this relationship. The Renault-Nissan/Daimler alliance will also encompass the "widespread powertrain sharing and co-development on future projects". This will include gasoline and diesel PSA powertrains being used in Smart and Mercedes-Benz models, while larger capacity Daimler diesel powertrains will be used in Infiniti and larger Nissan models. This is a much more comprehensive alliance than what BMW and PSA are currently proposing, but it is possible that it could act as a template for the evolution of the BMW-PSA relationship. IHS Automotive recently forecast that BMW would target a range of new technical alliances to improve its cost base, synergies and economies of scale, and this MoU would certainly fall into this category. BMW has always maintained its desire to remain a fully independent OEM, but it would be foolish to rule out an extended alliance along the lines of the Renault-Nissan/Daimler relationship as it looks to increase profitability.