What’s your strategy for EVs and battery sourcing? Is there any inflection point where building EVs becomes profitable?
If it wouldn’t be profitable, we wouldn’t build them. We cannot, because we have our stakeholders. That said, you always have to find the right price point, of course. There is a cost factor involved so you have to make sure that you don’t have a large battery for the lower-segment cars, because if that happens, you’re dead. Usually, in an assembly process, the more you produce, the more you automate, it becomes cheaper, but that’s not the case with batteries. So that is what you have to watch out for. And if you are planning to increase electrified vehicle production you must be really sure that you’ve secured your resources. And that’s what we have done. We plan to offer 25 electrified vehicles by 2023, two years earlier than originally planned and we anticipate sales of our electrified vehicles growing by an average of 30 percent every year from 2022 onwards.
What’s more important than the battery-making factory is sourcing resources such as copper, lithium and so on. And that’s where we’ve made long-term contracts. We buy the resources and sell it to the battery maker, and then he sells it to us.
Are you planning to build specific factories for pure-electric cars?
I don’t think that’s necessary. If you look at the production technology, they’re not so different (from an IC car). We start with the press shop, which can be used for any type of mobility. Then you can use different types or parts of the body shop to adapt to specific requirements. Next, you go through paint shop, which is the same for any type of vehicle. Plus we have a long tradition of building highly flexible assembly systems. One example is we already have nine vehicles on one assembly line at our Regensburg plant in Germany.
So that’s the kind of flexibility we have and electric mobility is also a form of flexibility, it doesn’t change the plant. Hence we are convinced that we don’t need a new factory just for electric mobility. There’s also an uncertainty from a volume perspective, so it’s not exactly the right strategy. However, there is a possibility that some day we could have as many electric cars as to fill a complete factory.
You mentioned that BMW will switch to renewable sources of electricity for its production sites. Can you elaborate?
Most important thing to achieve sustainability is to get your energy consumption down, which is often forgotten. And that’s the first step. In the last three years, the energy consumption of our plants has been reduced by half – all our plants use LED lights. The main thing is to decentralise your energy, you try to get as far away from the grid as possible. Then the rest you buy from the grid but in green form, from a supplier. For instance, in Leipzig, we have a wind farm on site, in Mexico, 100 percent of the energy is CO2-free. Our Chennai plant is a CKD unit, so I’m not exactly sure of the situation there but this applies to all our big plants.
With the transition to EVs, what are your thoughts on diesel, because from a CO2 perspective, it’s more of a solution than a problem.
The average fuel consumption in 2018 was below 5 litres/100km for diesel and 6 litres/100km for petrol. Therefore diesel has enjoyed a tax advantage for the last 25 years in Europe. So that positive effect doesn’t go away. Diesel also has CO2 benefits. So factually, there are very strong arguments for diesel’s defence. But public opinion is different. Still, in Europe, half of our current 2019 portfolio is diesel. So public opinion is different from what BMW customers feel. Maybe the public sees images of diesels putting out a lot of nasty emissions, but that’s far from reality.
However, the more important issue is replacing your fleet. Don’t throw diesel as a fuel away, instead replace your fleet. In Germany, the average age of a car has risen from 8 years in 2008 to 10 years at present. Emission wise, 10-year-old cars are in a completely different league. So provide incentives to get rid of old cars. 10 years is just the average figure, there are many cars over 15 years old that only comply with Euro 3, Euro 4 emission norms. If you are really interested in making a contribution to climate change, then replace the fleets. That, combined with keeping diesels and forcing electro-mobility is a good three-pronged approach.
The full interview was conducted in July 2019 and first appeared in the September 2019 issue of Autocar India. Oliver Zipse has since taken over as Chairman of the Board of Management of BMW AG.
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