BMW i3
Source: BMW

Yes, the headline is a bit of a tease and quite unthinkable, of course. Or maybe…?

Here’s the problem:

BMW’s strategy is in a dark place of the past, based on some board-level shenanigans.

The evidence:

  1. They have announced that they are only planning for a maximum of 15% of their vehicles to be BEVs or PHEVs by 2030.
  2. They have potentially catastrophic under-investment in batteries: they only have forward contracts for USD$1.7 billion in batteries to supply electrified vehicles in the next few years (compared with VW’s USD$40 billion)
  3. They include PHEVs in their strategy. (Others will cease to manufacture PHEVs for most uses because the duplicated powertrains are expensive and redundant. Only BEVs will sell in volume.)
  4. Continuing commitment to a legacy dealer-sales model. Dealers are terribly expensive ways to sell stuff. Amazon is pretty good at selling stuff online, as is Tesla which usually has only one, fully-owned, showroom/test-drive-launchpad per city, typically in a shopping centre; Tesla encourages buyers to order online.

Is the power of franchised dealers a drag on BMW’s strategy/survival? In fact, is that a fundamental difference in philosophies between the old guard and the new world; i.e dealers selling to prospects v buyers buying online?

The good things about BMW are their brand’s reputation for speed, style & build-quality. Incomparable, they would say. Can’t be replicated easily. Unassailable, they would say.

Really? How sure are they? Can they survive on these attributes alone?

If I was selling a horse that was fast, reliable, well-mannered & very pretty (if you like that sort of thing), would you buy one to ride to work? Lots of peeps ride horses but they keep them for leisure (or racing).

So, let’s imagine that full EVs are:

  • Cheaper to buy than ICEs/PHEVs, as all analysts believe will happen before 2025
  • MUCH cheaper to run since electricity costs nothing if you have solar or free charging at work/shops, or a fraction of the cost of petrol/diesel when you have to use the grid
  • Have increasing resale value (while ICE/PHEVs’ resale value collapses because why on earth would you now buy one?)

Then who on earth would buy a petrol/diesel/PHEV BMW for daily use? You might buy one for the weekend if you had that sort of money. But goodbye dealers and goodbye mass market. Hello, empty assembly lines and layoffs. Hello, looming bankruptcy. Hello, new Board. Hello takeover. Hello Amazon. (or VW or GM/Tesla).

BMW’s factories with their high-quality assembly lines, engineers and stylists would be a great acquisition if you had access to batteries. Unlike BMW with it’s paltry USD$1.7b.

Amazon has just taken a significant investment in EV-LCV/SUV-maker, Rivian which claims good forward battery contracts. VW has invested in a USD$40b battery pipeline for the next few years, aiming for enough battery supply to stop ICE production altogether.

Rivian R1S electric SUV
Amazon have just invested $US700 million in EV startup Rivian. Source: Rivian

Tesla make their own batteries at whatever rate they like and they’re building another battery factory in Shanghai to serve the Chinese market which will soon pivot completely to EVs (because their one-party government wants to, and can). GM is snuggling up to Tesla. (They’ve been seen on romantic dates).

The current keys to battery acquisitions are access to economically competitive sources of Lithium, Cobalt, Nickel and Manganese. [Cross off Cobalt for Tesla; they’re getting rid of the need for it].

These minerals can become barriers to entry for late entrants to the battery market, after all the cheaper sources have been locked up. Of course, solid state batteries with new anode/cathodes could invalidate current platforms – maybe BMW is banking on that, but why then announce maximum 15% electrification?

And what exactly does BMW intend to sell in Norway, Netherlands, France and other countries which have already legislated a timetable to forbid sales of non-electrified vehicles by 2025/30. (Add China, and others soon).

So, how long is it before BMW finds itself making beautiful, well-engineered cars that no-one wants?

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