BMW Gets Rid of Some Stick Shifts to Absorb Electric-Car CostsBy
Electric-car profitability trails conventional cars, BMW says
‘Our biggest lever is to reduce complexity,’ CFO Peter says
BMW AG is scrapping stick shifts on some models in the U.S., such as the 2-Series coupe, as the German carmaker streamlines options for customers to stabilize profitability amid higher spending and lower returns from electric cars.
With a wide array of choices, such as more than 100 steering wheels and engine configurations, BMW is looking to cull little-used options after spending on research and development doubled from 2008 to about 5 billion euros ($5.7 billion) last year, Chief Financial Officer Nicolas Peter said Wednesday. The move is part of efforts to offset ramp-up costs for technology such as battery-powered vehicles.
“Our biggest lever is to reduce complexity and lower the amount of choices there are,” Peter told journalists at the company’s headquarters in Munich. “Profitability on electric cars is definitely challenging.”
With the auto industry bracing for a shift to an era of electric robo-taxis, traditional carmakers are facing tough choices on how to allocate resources as any payoff from new technologies could still be years away. To keep a lid on electric-model costs with demand still unpredictable, BMW will add battery packs to existing vehicles -- including an electric variant of the Mini in 2019 -- rather than invest in more autos like the battery-powered i3.
“Our electrified cars are profitable today, but it’s less than vehicles with combustion engines,” Peter said. “Models like our plug-in hybrids need to become more profitable, and we need to cut costs to ensure we can meet our goals on profitability.”
BMW stuck to a profit-margin target at its auto division of 8 percent to 10 percent of revenue. Peter also reaffirmed a forecast of a “slight” increase in earnings this year. The CFO declined to say how much savings the company’s simplification push might yield.
Even amid pressure to spend on electric cars and self-driving features, BMW hasn’t reduced investment in combustion engines and continues to spend on diesel technology. Diesel remains a key plank for achieving increasingly stringent emissions standards, even after a backlash against the technology stemming from Volkswagen AG’s cheating scandal.
“We won’t be able to meet regulation in Europe on CO2 without the diesel,” Peter said. “So we’re continuing to invest in the technology.”