As BMW bodies slid down an assembly line in Munich recently, showered with sparks from robotic welders, it was hard to tell which vehicles would be powered by batteries, fuel engines, or both. In the view of many analysts, this is not a good thing.
The German automaker’s electric vehicles are built on the same assembly line as gasoline-powered cars and look similar on the outside. This approach, using the same basic body for electric, hybrid, gasoline and diesel cars, has been seen as an awkward and ineffective compromise that some established automakers have taken as they struggle to compete with Tesla and emerging Chinese automakers that produce cars designed exclusively for battery. power.
But, confounding the experts, BMW’s strategy paid off. The company sold 376,000 electric vehicles last year, including some under the Mini brand, up 75% from the previous year. In the luxury segment, BMW was second only to Tesla, which remained dominant with 1.8 million cars. Electric vehicles accounted for 15% of BMW sales in 2023, up from 9% the previous year.
The company’s growth comes as sales of electric vehicles have grown at a slower pace overall worldwide. What’s even more surprising is that BMW, unlike General Motors or Ford Motor, made a profit on the electric vehicles it sold.
BMW’s experience suggests there is hope for at least some established automakers as Chinese automakers such as BYD begin exporting cars to other Asian countries, Europe and Latin America. As electric vehicles move into the mainstream, the popularity of BMW cars suggests that many buyers appreciate the familiarity and build quality of long-established automakers and remain wary of newer brands.
If so, BMW’s approach could point the way for other automakers that have been building cars for decades but have made little progress in transitioning to battery-powered vehicles.
BMW’s strategy bought the company time to develop expertise in battery technology and design a range of cars specifically to be electric. It has helped the Munich-based company deal with fluctuations in demand because it can more easily dial up or down production of different types of cars.
The approach has also helped BMW stick with customers interested in electric propulsion but not ready for a sharp break from the past. The company offers hybrid versions of many of its most popular models, saying buyers should be able to choose a car’s propulsion technology as easily as its color.
“We would lose our traditional customers if you told them, ‘You’re part of the old world,'” Oliver Zipse, BMW’s chief executive, said in an interview, referring to people who still preferred cars with internal combustion engines. “They would secede immediately.”
Next year, BMW will start selling a new line of cars designed to run on batteries alone. Last month, at a site overlooking a rocky coastal area north of Lisbon, Mr. Zipse showed prototypes of a sedan and a crossover sport-utility vehicle that are part of what the company calls the Neue Klasse. or New Order.
These cars will offer significant improvements over existing models, including batteries that store 20 percent more energy per pound and features not available from Tesla, such as a digital display that runs across the lower edge of the windshield.
The display, which can be adjusted, gives drivers information about speed, range, weather and navigation without having to take their eyes off the road and eliminates the need for an instrument panel in front of the steering wheel. Most Teslas have a large screen in the center of the dashboard, requiring drivers to look to the side to see maps and other information. This screen also has many of the car’s controls.
In addition, the new BMWs will be available with self-driving technology that allows drivers to take their hands off the steering wheel on highways and change lanes just by glancing in the side mirror. This feature directly challenges Tesla’s famous self-driving technology.
Ever since Tesla proved over the past decade that electric vehicles were practical and fun, it’s been an open question about which car companies would rule the industry. Silicon Valley-based Tesla has pioneered software and battery technology, but has struggled with manufacturing and introducing new models. Established car companies had decades of manufacturing experience, but faced a steep learning curve with batteries and software.
BMW is likely to survive this fraught transition to electric vehicles because of its engineering know-how, strong brand and profit margins that have allowed the company to invest in the new technology, said Matthew Fine, portfolio manager at Third Avenue Management, a investment company that owns BMW shares.
“We thought this would give them a very good fighting chance,” Mr. Fine said. “And that seems to have been true so far.”
The luxury car industry has started the transition to electric vehicles with some advantages. The brand recently topped Consumer Reports’ ranking of auto brands that make the best vehicles for the second year in a row. Tesla was ranked 18th out of 34 brands on the list.
But Tesla has significant advantages. A Tesla Model S, which starts at $75,000, can travel more than 400 miles on a charge, according to the Environmental Protection Agency, compared to about 320 miles for a BMW i7, which starts at well over $100,000 . BMW said its next generation of cars should erase that deficit with smaller batteries that provide 30 percent more range.
Tesla could be vulnerable in many areas. Shares in the company, which is led by Elon Musk, have lost more than half their value since their peak in 2021. BMW shares have gained about 17 percent over the same period. Wall Street still values Tesla at more than eight times BMW’s market value.
Tesla’s lineup is dated by automotive standards. The company recently began selling a facelifted version of its Model 3 in the United States, but hasn’t introduced a completely redesigned sedan or SUV since 2020. Tesla is making its newest model, the Cybertruck, which launched last year, at a limited price numbers.
“The newcomers,” Mr. Zipse said without mentioning Tesla, “if they’re not careful, they can get old before they get old.”
A ride in an i7, an electric incarnation of BMW’s flagship sedan popular with politicians and corporate executives, offers a lesson in the creature comforts that are vital to the company’s appeal. The car, which looks almost identical from the outside to its internal combustion counterpart, is eerily quiet even at highway speeds. The car has a large video screen that folds out from the roof.
Mr. Zipse argues that BMW is not just a car company. “BMW, yes, it’s a car company,” he said. But, he added, “at bottom, it’s a technology company that has the ability to integrate very different technologies into one product.”
In Munich, BMW is razing buildings used to produce internal combustion engines to make room for assembly lines that will produce Neue Klasse cars. The last V-8 rolled off the assembly line last year.
BMW buys most of its batteries from suppliers such as China’s CATL, which also sells to Tesla but develops its own technology. In a building with blue and gray corrugated metal walls in the Munich suburb of Parsdorf, BMW operates a mini-factory where it tests new battery designs and manufacturing processes. One change involves allowing a suspension containing lithium and other active ingredients to be mixed in a continuous flow rather than in batches, the now conventional practice. The process is faster and cheaper.
From 2027, BMW will produce nothing but electric vehicles in Munich, although it will continue to build models with internal combustion engines at other plants. The company has large factories in Shenyang, China. Spartanburg, SC; and other locations in Europe. BMW has said it will begin building electric vehicles in the United States by the end of the decade.
Unlike Audi and other rivals, Mr Zipse has refused to put an end date on internal combustion engines, drawing criticism from environmental groups.
“BMW could lead the European car industry in the transition to electric vehicles if it committed to ending production of climate-damaging internal combustion engines,” Benjamin Stephan, a transport expert at Greenpeace Germany, said in an email.
But Mr Zipse said the future of the industry was clearly electric. BMW sales with engines have increased, he noted. “The fastest growing segment is electrification,” Mr. Zipse said. Electric vehicles, he added, “will be a dominant market force.”
