IHS Global Insight Perspective | |
Significance | BMW's chief executive officer, Norbert Reithofer, has said that the world's leading premium passenger car manufacturer is "on the verge of revolutionizing vehicle production" with the new Megacity electric vehicle. |
Implications | BMW wants to put itself at the forefront of the alternative-powertrain revolution by linking green technology with its brand values as the world's leading premium passenger car manufacturer. |
Outlook | BMW's progressive attitude and heavy investment in alternative powertrains, including electric cars, and its desire to meld its traditional brand values with these new technologies looks an intelligent business strategy. However, there are question-marks over its implementation and the associated research and development costs, especially as BMW looks determined to retain its independence. |
BMW is planning to marry the high-technology content of its new Megacity electric vehicle (EV), which is due to make its market debut in 2013, with corresponding new technology in vehicle production. The company's chief executive officer (CEO), Norbert Reithofer, outlined the plans at the company's annual shareholders' meeting, claiming that the company is currently "on the verge of revolutionizing vehicle production". The company will introduce new production techniques that will be required by the extensive use of the high-strength composite material carbon fibre-reinforced plastic (CFRP), which will play a significant part in the materials mix of the Megacity. BMW has established a joint venture (JV) with the carbon-fibre specialist SGL Group, with the two companies agreeing a contract to build a US$100-million carbon-fibre component plant in Moses Lake, Washington, in the north-west United States (see United States: 8 April 2010: BMW Supplier to Open Parts Manufacturing in Washington State). This facility will provide the carbon-fibre components that will then be integrated into the state-of-the-art vehicle assembly process, which will take place in Germany. In spite of the carbon component plant being located halfway around the world from Germany, Reithofer said that assembly of the Megacity will take place at the company's facility in Leipzig (Germany), although the Wackersdorf and Landshut plants will also be involved. Commenting on the decision to locate the production of the Megacity in Germany, Reithofer said, "We keep investing in Germany as a production location—particularly in the field of future-orientated hi-tech. That is BMW."
Shedding further light on the advanced production technology and green industrial strategy that BMW is plotting, Reithofer said, "The assignment we have given ourselves from the very beginning is to develop a Megacity vehicle that will be a zero-emission vehicle. And it will be sustainable throughout its entire lifecycle. Simply put, we are on the verge of revolutionizing vehicle production. We will apply carbon and carbon-reinforced materials at a scope unprecedented in series vehicle production." At the meeting, Reithofer also confirmed that the company is using a range of powertrain measures to lower its average range emissions. As a result, the company is planning to launch the production version of its 5-Series ActiveHybrid as a production model in 2011, with a full hybrid variant of the company's 3-Series also in the planning stages. Reithofer said, "As early as next year, the new BMW 5-Series will also be available as a full hybrid. And we are anticipating the hybridization of further models series, such as the 3 series." The move is part of BMW's drive to reduce the average carbon dioxide (CO2) emissions of its vehicle range as it looks to meet the strict new emissions regulations that will be rolled out across Europe over the next decade, with the European Union (EU) targeting an average of around 95 g/km CO2 by 2020 for new cars sold in Europe. BMW has made the most progress in lowering its average emissions in recent years out of all the major European original equipment manufacturers (OEMs). In 2008 the company recorded a 10.2% reduction in average fuel consumption and CO2, with the company's range offering average CO2 emissions of 154 g/km, according to the European Federation for Transport and Environment's (T&E) most recent analysis.
Outlook and Implications
BMW's ambition to launch the Megacity EV as a production vehicle in 2013 while continuing the roll-out of its hybrid vehicle line-up is laudable. The company is looking to increasingly associate its brand with green technologies, a strategy that began to be rolled out in earnest in 2008 with the launch of its EfficientDynamics programme. This combined a range of measures, such as low rolling resistance tyres, gear change indicators, and start-stop technology in a combined package to reduce CO2 emissions. From that point on, BMW has increasingly looked to position itself as a brand that can offer cutting-edge vehicle technology with a view to lowering emissions and increasing overall efficiency, with the Megacity being the exemplar of this ethos as a zero-emission vehicle. The company's planned extensive use of carbon fibre in the Megacity will further enhance its already impressive technology quotient, with the company using the technology to lower the curb weight of the Megacity, which will in turn improve its overall efficiency. Integrating these carbon-fibre components into the production process of the Megacity is likely to prove challenging and has led to BMW's high-technology production strategy for the vehicle. BMW has not gone into detail about the production techniques it will employ with the Megacity, but it is likely to use state-of-the-art just-in-time (JIT) component ordering and storage systems. The company is likely to mirror some of the strategies and techniques used at Porsche's Leipzig facility, where the Panamera line is currently acknowledged as one of the most technologically advanced in Europe. However, there are some question-marks over BMW's ambitious strategy in light of its determination to remain independent, which goes against the current trend for consolidation and alliances in the industry. BMW's cost structure is being closely managed to achieve the company's ambitious target of an earnings before interest and taxation (EBIT) margin of 8–10% by 2012, and at the same time it is also embarking on the most ambitious research and development (R&D) programme in the company's history. It remains to be seen how well these two strategies can be reconciled.