It is easy to be gloomy about European automakers facing intense competition from technologically sophisticated and lower-cost rivals such as BYD Co (比亞迪) and Xiaomi Corp (小米), but at least one Western manufacturer, is aiming to convince customers and investors it can compete with the best that China or Tesla Inc offer — and BMW AG might have found a sweet spot.
On Friday, the German automaker unveiled the electric iX3 sport utility vehicle. Car launches are generally overhyped and quickly forgotten, but this one mattered: It showcased the advanced hardware and software that would underpin future BMW models, both battery-driven and gasoline-powered.
Dubbed Neue Klasse, in homage to the midrange models that saved BMW from financial ruin in the 1960s, its new technological building blocks would enable greater battery driving range, faster charging and a much better user experience. The company said the iX3 can be driven as far as 800km before plugging in; a 10-minute charge delivers a range of more than 350km.
Representing more than 10 billion euros (US$11.72 billion) of investment and about five years in the making, BMW’s big reset looks to have been well calibrated for an era in which vehicles are evaluated more for their software chops than horsepower.
Journalists who tested prototypes have been impressed by the responsive driving dynamics and futuristic cabin — instead of the usual instrument cluster, a panoramic display stretches across the entire windscreen.
BMW also appears to have adopted a cleaner exterior design language: There is no sign of the hideously oversized grilles that blighted some recent models, thank goodness.
It is rare for BMW to make such a big splash; the company prioritizes long-term thinking while its executives try to avoid controversy or theatrics. Almost half of BMW’s shares are controlled by the billionaire Quandt family, whose calmness and low profile could not be more different from Elon Musk’s grandstanding; his outlandish promises and ever-evolving “master plans” fuel Tesla’s stock price, while BMW remains overlooked by many investors and occasionally scorned.
The Munich-based company was criticized a few years ago for refusing to join the stampede for electric vehicles (EVs) even as European rivals were vowing to go all-electric by the end of the decade. BMW’s management insisted that providing customers with a choice of electric, hybrid, gasoline or hydrogen-powered vehicles would be essential for years to come because the transition would happen gradually and at different speeds globally.
BMW learned this lesson the hard way: It was an early leader in EVs, but demand for its quirky i3 hatchback, launched in 2013, proved disappointing.
Its factories were duly equipped to produce several powertrain variants on the same production line, while its current EVs are styled to look similar to their combustion engine equivalents to avoid putting off customers.
“A dependency on a single technology can be damaging to an industry,” chief executive officer Oliver Zipse told investors in July. “Putting all your eggs in one basket is just poor asset allocation.”
BMW’s stubbornness has been proven right: While Mercedes-Benz Group AG, Porsche AG and Volvo Car AB have watered down their electrification ambitions amid several high-profile EV flops, BMW has stuck to its philosophy of technological openness and continues to expect EVs to contribute more than 50 percent of its sales in 2030.
It offers EVs in all key segments and these have proven a hit — even before the arrival of the latest Neue Klasse tech. In the first half of this year, EVs made up one-quarter of BMW’s deliveries in Europe, where its battery-powered models were outsold only by Volkswagen AG and Tesla.
Admittedly, BMW is struggling in China, where it is downsizing its dealer network following a loss of market share. It is also facing a financial hit from US tariffs, albeit one it can offset by exporting vehicles more cheaply from its US factory to Europe (as these are expected to be subject to zero tariffs instead of 10 percent).
Nevertheless, BMW has coped far better with these headaches than some of its peers. While Porsche has repeatedly cut earnings guidance this year and is poised to be ejected from Germany’s blue-chip DAX index, BMW has stuck by its forecast for its automotive activities to achieve an operating margin of 5 to 7 percent this year — not bad under the circumstances, although below its usual target of 8 to 10 percent.
With the heavy investments for Neue Klasse now behind it, and the batteries in its upcoming EVs set to cost far less than prior models, BMW’s margins should improve in coming years.
Yet this resilience and its entreaties that investors differentiate among European automakers (rather than tar them with the same brush) have received only a lukewarm response from investors.
While the company’s shares have outperformed its peers this year, BMW’s 56 billion-euro market capitalization is not much higher than its 45 billion euros of automotive-related net financial assets; and it is just a sliver of Tesla’s more than US$1 trillion valuation. That probably would not change until BMW proves it can still charge premium prices for its new products when high-tech models such as Xiaomi’s YU7 sport utility vehicles cost comparatively little.
Nevertheless, BMW has earned the right to take a big risk with the Neue Klasse and has clearly thought carefully about it. Europe’s auto industry cannot avoid a reckoning — but BMW can.
Chris Bryant is a Bloomberg Opinion columnist covering industrial companies in Europe. Previously, he was a reporter for the Financial Times. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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