BMW to focus on electrification of fleet with aim to boost sales – The Globe and Mail

Posted: Friday, March 31, 2017

BMW Group’s chairman sounded confident last month when he announced his company sold more than two million vehicles in 2016, but there was a chip in the veneer.

After more than a decade at the top of worldwide sales, fewer BMWs (2.003 million) were sold than Mercedes (2.08 million) vehicles. Perhaps more aggravating, BMW was outsold by Audi on its home turf in Europe. Audi recorded global sales increases in 2016 of 9 per cent and Mercedes 11 per cent, compared with BMW’s 6 per cent. The German rivals are catching up.

While BMW Group retained its title as the overall sales leader among premium brands, there’s an asterisk – sales by the group’s Mini (360,000) and Rolls-Royce (4,000) brands are included in the total.

That’s why BMW Group chairman Harald Krueger is looking to boost sales by introducing 40 new or refreshed vehicles in the next two years, and why the company will continue to focus on the electrification of its fleet. Since introducing the all-electric i3 in 2013, BMW has sold more than 100,000 electric cars, but the company expects to sell another 100,000 electric vehicles this year alone.

“BMW is already in Phase 2 of electrification,” Krueger said recently, in an interview. “Phase 1 was the i3 and the i8, and the next step is that we transfer the plug-in hybrid technology out of the i brand into the core of BMW. Electrification in the BMW Group will go into every field, not just one car but across the globe.”

There are now seven pure-electric and hybrid electric vehicles (EVs) in BMW’s fleet, and an eighth electric car will be added this summer when the plug-in hybrid Mini Countryman goes into production. By 2025, BMW expects at least 15 per cent, and up to 25 per cent, of its total car sales will be electrified vehicles.

The German company is introducing its electric cars to many Europeans through its car-sharing service, DriveNow: More than 800 of its 5,400 vehicles are pure-electric i3s, and some 190,000 customers drove them in 2016. Krueger conceded that they’re still a challenge to promote in North America, and that government investment in public charging stations is essential.

“Our experience is that customers would like to have a charging point at home if possible, and would like to have one at work, and they need chargers in public and on the streets, like at shopping malls. But the streets are most difficult. You can’t push [electrification] when there is no infrastructure, and customers will not buy into the car.”

However, electrification is important for different reasons in different parts of the world, he said.

“Oil and gas prices also play a significant role. In the U.S., if oil and gas prices are low then the demand for EVs is small. In China, which is still the largest market for EVs, they have heavy problems with their air quality and pollution, and you can’t solve that by producing more combustion engines. So the driver is different and the situation across the globe is different, but I am believing it will come.”

By then, of course, the fleet should also include autonomous cars: The self-driving iNext is intended for release in 2021. However, whatever new technology is capable of, Krueger said BMW will always make cars that allow the driver to take control on an enjoyable road.

“I’m selling emotions and passion – we’re not in a rational business,” he said. “If a customer just needs to go from A to B, then he doesn’t need a BMW. It’s about heritage, it’s about design, statement, fun to drive, enjoying the technology and it tells you something about the owner.

“I learned in the U.S., for example, that our Mini customers were giving their cars nicknames. A customer would come in to the service department and say, ‘David needs the treatment.’ The relationship between car and driver in the premium business is different.”

Sales of Mini added 360,000 vehicles to the BMW Group’s total, as well as 4,000 Rolls-Royces and 145,000 motorcycles; at Daimler AG, sales of Smart added almost 145,000 units to the Mercedes total.

Krueger noted that the competition to be No. 1 is not just about sales, but also profitability. BMW’s annual report showed group revenue rose by 2.2 per cent in 2016 to more than €94-billion ($136.6-billion), while its pretax profit rose almost 5 per cent to €9.7-billion.

“We’re pursuing a strategy of globally balanced sales and manufacturing,” he said. “In our business, I have to live with volatility. Russia is still in a recession. Turkey is still in a recession. Those are just some markets, while others are doing well. Volatility will remain a stable factor for the future and we just have to cope with it.”


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