Reinventing BMW: forget everything you know about the brand to date

Tomorrow is here today for BMW’s developers.

Bavarian carmaker BMW has put the broom through its traditional car business to reinvent itself for an electric, autonomous future, it was revealed on Friday.

The 100-year-old company confirmed it has accelerated the development of pure battery-electric and plug-in hybrid technologies, insisting it will have electrified versions of every model between now and 2020.

A strategy document titled Strategy Number One Next revealed the brand will launch its first Level 4 autonomous car, the i-Next, as early as 2020, but is frantically retraining its traditional core of mechanical engineers to turn them into electrical engineers.

It hasn’t ignored its traditional business, delivering plans to introduce a plug-in hybrid 5-Series in March, a battery-electric MINI by 2018, a BEV X3 with 500km of range in 2019 and the full-sized five-seat i-Next BEV in 2020, but that’s not at the document’s core.

While it has revealed its plans to build in the manufacturing flexibility to change direction on internal-combustion, battery-electric and hybrid cars to meet a predicted fast change in demand, it has made an unsubtle dig at Tesla for releasing under-validated autonomous systems to customers.

Now pushing the internal motto of “think like a start-up, deliver like a grown up”, the German premium carmaker’s Chairman, Harald Krüger, said the brand is now deep diving into digital services and autonomous development.

He said the brand’s engineering division, under the leadership of Klaus Fröhlich, had future-proofed the brand for every foreseeable powertrain demand, plus a world with lower rates of car ownership thanks to increasingly urbanised populations.

At the same time it has been refocusing its automotive business, Krüger said, covering itself off against predicted “disruptor” threats from start-ups by delivering its own internet-based services and car sharing business units.

It has planned to use its new-found digital competence to deliver it a new revenue stream based around the internet services provided by its BMW Connect app, which will be widely expanded in the near future.

The entire strategy document is a 10-year plan to change the company’s priorities to ward off attacks to its traditional businesses by everybody from Über, Tesla and Lyft to Jaguar, Mercedes-Benz, Audi, Porsche and a wave of Chinese BEV makers.

Admitting BMW didn’t really know what the demand for battery-electric and plug-in hybrid cars would be in the future, Krüger said he had worked to protect the firm against any sudden shift in buying trends, without dipping in to predicted profits.

"The next thing and the mix depends a bit. There are countries like Norway or The Netherlands where it's battery-electric (BEV), other countries prefer plug-in hybrids (PIH)," Krüger said.

“We can’t really tell you what will happen.

“There are going to be countries where, if you look at it today, it depends on the infrastructure. If that can’t keep up then it (the opportunity to benefit from BEV) will be lost.

“We would like to average eight to 10 per cent EBIT margin and we need to find it in the future. We didn’t change any goals in the financial side in the future.”

While admitting BMW had a renewed focus to deliver electric and autonomous cars, Krüger urged some caution, insisting up to 85 percent of new cars sold in 2025 would still have internal-combustion engines.

“We will still have 80 percent combustion engines (by 2025),” Krüger admitted.

“A certain part of that 20 percent will be plug-in hybrid. We have more jobs then with internal-combustion development. We have not designed our last internal-combustion engine family.”

BMW’s strategy document predicts its three brands would have a combined BEV and PIH take-up rate of between 15 and 25 per cent by 2025, giving it up to half a million electrified cars a year.

It took BMW until November this year to clock over 100,000 in sales of electrified vehicles, but Krüger insists it will sell another 100,000 in 2017 alone.

“BMW is set up differently to our competitors because the only things we do not do ourselves is transmissions. The number of people working here in powertrain is lower than our competitors because we don’t do our own transmissions.

“Now we have more software training for mechanical engineers.”

Like most carmakers, BMW has traditionally made money by building and selling cars and providing the finance for customers to buy or lease them. The strategy document showed BMW was transforming itself into a mobility-solutions provider, without losing touch with its product origins.

It is also lessening its risk and increasing its development power in autonomous driving by teaming with both Intel and Mobileye in a joint-venture, while it also has high hopes for its five-year-old DriveNow car-sharing joint venture with German rental car agency Sixt.

Its other critical joint-venture is the seemingly unlikely one with Audi and Mercedes-Benz that saw it buy the highly accurate HERE digital mapping service unit off Nokia, then offer to open it up for use by other carmakers.

It has begun work on a campus in Munich to draw in suppliers and universities for research and development, along with topping up the funding plan on its i Ventures venture capital operation to €500 million and moving its headquarters to Silicon Valley.

“This is why we founded i Ventures in 2011 - to make selective investments in young, fast-growing start-up companies,” Krüger said.

“We have now significantly increased its capitalization (up to 500 million euros over 10 years) and are relocating the unit to the heart of Silicon Valley.

“Everybody is talking about Uber and Lyft - but we are setting different priorities.”

One of those priorities is a combination of autonomous driving and digitalization.

“The BMW Group’s vision is clearly defined: We want to be the leader in autonomous driving,” Fröhlich said.

“We have already announced that we will bring highly autonomous vehicles to the streets in 2021 with the BMW i NEXT. We are rigorously pursuing this goal. On our own, and through targeted cooperation with industry leaders, we will develop the key areas for the technologies of tomorrow.

“Our shared aim is to create industry standards with these technologies. That is why we are open to working with additional partners: An open platform will quickly make these systems better and more secure.

“What we have already mastered on our own is “motion control”, the design and control of the vehicle through drive train, chassis, brakes and full systems integration.”