William Boston reports in the Wall Street Journal:
The German luxury-car maker announced a strategy shift that includes plans to invest in new technology to head off upstart competitors, such as the ride-sharing service Uber Inc. and Alphabet Inc.’s Google. Value creation is shifting from the actual hardware toward software and services. BMW could imagine developing its own premium ride-sharing service
BMW AG is betting that the future of the automotive industry is electric.
The German luxury-car maker announced a strategy shift on Wednesday that includes plans to invest in new technology to head off upstart competitors, such as the ride-sharing service Uber Inc. and Alphabet Inc.’s Google, which threaten to upend the global auto industry.
Last year—just after being named as the replacement for Norbert Reithofer, who is now chairman—Chief Executive Harald Krüger announced plans to overhaul the company’s strategy. The 50-year-old executive was handpicked by the controlling Quandt family shareholders, who saw him as more in touch with the digital economy than BMW’s old guard.
On Wednesday he said: “We are leading BMW into a new era.”
Mr. Kruger’s plans appear to be for a more evolutionary change than a radical overhaul. He set no new profit goals, reaffirming existing targets of achieving a pretax profit margin of between 8% and 10% in the automotive division. That compares to 9.2% last year.The last major shift in strategy was nearly a decade ago, in 2007, when Mr. Reithofer unveiled his Strategy One plan, setting ambitious targets and launching the i-Series, an audacious plan to build a battery-electric urban vehicle.
Mr. Krüger has dubbed his plan Strategy One Next, which suggests that the new boss will largely carry on where the old boss left off.
He said that BMW planned to develop a third model in its i-Series of electric vehicles, dubbed iNEXT. The car would incorporate a still-to-be-determined electric powertrain, new lightweight materials, a self-driving mode and would give the owner the option of driving or handing the wheel to the computer. It would also include technology that connects the car to the Internet.
The iNEXT won't be in showrooms for at least five years. Currently, the i-Series consists of the small i3 battery-electric urban vehicle and the i8 hybrid sports car. Mr. Krüger said BMW would launch an open-top roadster version of the i8 in 2018. The i3 would get a makeover and more powerful battery this year, Mr. Krüger added.
But judging by the company’s comments, BMW’s showcase i-Series looks like it will remain largely unchanged for years to come.
BMW also had little new to say about how it planned to develop mobility services, which is the latest buzzword among auto executives. The next big thing in auto technology is equipping the interior of the car with digital devices and services and developing services outside the car to fend off competition from upstarts such as Uber.
“Value creation is shifting from the actual hardware toward software and services,” Mr. Krüger said. He added that BMW could imagine developing its own premium ride-sharing service but gave no specifics.
The push into electric vehicles and new digital technology is being driven by a combination of regulatory pressure to reduce emissions and the emergence of competitors such as Google, Apple Inc., Uber and Tesla Motors Inc.
To pay for investment in the still fledgling market for electric vehicles, Mr. Krüger said BMW would roll out more sport-utility vehicles, including a full-size X7 as well as high-end luxury cars like its 7-Series sedan.
Mr. Krüger said BMW also aimed to offer a plug-in hybrid versions of each of its core models and would continue to develop both battery-electric and fuel-cell technology. The company said it didn't expect fuel-cell to be viable until around 2025.
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