Carmakers relying on volume to confront Tesla

Edward Taylor –

BMW and Mercedes are betting they can mass produce new electric cars based on conventional vehicles, defying sceptics who say they will need more radical designs to head off the threat from Tesla and other start-up carmakers.
There are two ways to make battery-driven vehicles: use a clean-sheet design like Tesla, or a traditional vehicle platform that can use all types of motor: combustion, electric or a hybrid of the two.
Electric motors are smaller than petrol or diesel engines, so electric vehicles designed from scratch can benefit from better interior packaging which allows a bigger passenger space. The problem: their unique design requires a dedicated production line and expensive new factories.
BMW learned this the hard way after pouring billions into bespoke carbon-fibre based electric cars, the i3 and i8, which failed to sell in large numbers.
“It is easy to build an electric car. It is difficult to earn money with it,” said BMW research and development chief Klaus Froehlich.
Since BMW started selling the i3 in 2013, vehicle battery performance has improved by 40 per cent, allowing carmakers to make electric cars with the same heavy underpinnings used by petrol cars and still get a range of 500 km from one charge.
This, they believe, gives them an advantage over makers of custom built electric vehicles.
As Tesla enters the mainstream with its cheaper Model 3, BMW has made a strategy u-turn to produce electric cars in large numbers, pledging to offer battery-powered variants of regular models.
Froehlich said vehicle designs dedicated to only one powertrain were no longer required.
BMW is preparing to launch an all-electric version of its popular X3 offroader by 2020, and Mercedes-Benz will launch the electric EQ in 2019, based on its best-selling SUV, the GLC.
A new electric BMW, the i Vision Concept, will use the same underpinnings as future versions of the BMW 3-Series.
Electric and petrol versions will be built on the same production lines, allowing a flexible response to demand for electric vehicles.
To prolong the life of its i3, BMW has given it a fresh design and a new battery. But the company’s strategic bet is on overhauling volume production lines to rapidly scale up production if needed.
Demand for electric cars remains weak due to their high purchase price and limited charging infrastructure. But this may change if battery prices keep falling.
“Battery costs are coming down. We believe that we can bring economies of scale to bear beyond just the battery and drivetrain. I think we will be in a good competitive position from that perspective,” Daimler Chief Executive Dieter Zetsche, whose company owns Mercedes-Benz, said.
Mercedes is also working on a platform just for electric and autonomous cars, to be introduced after its initial wave of electric vehicles hit the road.
Germany’s three big premium carmakers — Mercedes, BMW and VW Group’s Audi — have most to lose if Tesla’s volume assault on the premium car market succeeds.
Loss-making Tesla, which made 83,922 cars last year, is already far ahead of the German luxury brands in electric car sales. BMW sold 25,528 electric i3’s last year and Mercedes won’t disclose sales figures for its electric B-Class. Overall, Mercedes and BMW sold more than 2 million cars apiece last year.
The Germans long resisted mass electrification, saying no competitor could make electric cars at a profit because the batteries were too expensive. Battery prices have slumped but a 500-km battery still costs $14,000, while a combustion engine is less than $5,000, analysts at Bernstein Research calculate.
Carsten Breitfeld, chief executive of start-up Chinese carmaker Byton, says vehicles must be rethought to unlock their potential, both as new electric cars and as platforms for a new consumer experience.
“Trying to adapt a volume architecture to produce electric, diesel and plug-in hybrids is fundamentally flawed, because these products will be compromised,” Breitfeld said.
Breitfeld used to be a top electric vehicle engineer at BMW, where he headed the i8 sportscar programme before he defected, believing that volume carmakers were no longer setting the pace in electric vehicle design. Breitfeld sees the German carmakers’ answer to the expected surge in electric car demand — putting an electric motor in a conventional car — as a mistake. — Reuters