So long, BMW?

If you are an automaker with a more sportive image, then it really hurts when you lose against a competitor, who seemingly came out of nowhere, and whom you regularly make fun of. I am not talking about sales numbers, but from a race between a BMW M3 and the performance version of a Model 3. Top Gear compared this spring both cars, and BMW’s gasoline car had neither a chance with the acceleration or the race on a 2 miles track.

While this may be more of anecdotal value for regular Joe or Jane, and may not be a factor for buying a car, it certainly hurts a manufacturer who’s projecting his sportive image to the masses.

Looking at the most recent statements and news, and drawing that on a trend curve, we have to worry about an icon of the German automotive industry: BMW.

Confused Management

A very confused strategy becomes blatantly visible, where the left doesn’t know what the right is doing. BMW CEO Harald Krüger announced an acceleration in the timeline of BMW’s electric vehicle program. Instead of 2025 already in 2023 there are supposed to be 25 models offered. That announcement is in sync with the one from Toyota, that’s expecting to have half of its production being electric vehicles not in 2030 as initially planned, but already in 2025. And BTW: BMW is generous in counting electric vehicles. The company also subsumes plugin hybrids into that count.

Those news are following the exponential curve of new registrations, where we expect that with the current doubling rates the number of electric vehicles will reach 50% between 2025 and 2030 in Germany.

BMW’s head of development Klaus Fröhlich contradicted his CEO. Journalists quoted him saying that ‘Europeans are not buying electric vehicles’. And he added that EVs are a waste of resources and a hype. I talk in my most recent book Foresight Mindset about hypes, and why it is dangerous to call something a hyope or fad and how this makes organizations vulnerable to changes.

Fröhlich also stated that “in 2023 at least 80 percent of vehicles produced by BMW will have a combustion engine.” Very likely, but BMW won’t be relevant anymore by then.

In the meantime the demand for attractive EVs reaches a new peak in many countries, with Norwegen just being the most prominent example, while BMW’s sales in North America have been plummeting in the first half of this year. In the first five months of 2019 the company sold between 11 and 43 percent fewer sedans across all price ranges in the year before. And the argument that EVs are being heavily subsidized with tax rebates pales and is not really convincing considering the Diesel subsidies in many countries and the global military spending that secures the globes oil supply.

What’s in those statements hidden is the hope that EVs are just a fad that will disappear soon, and where traditional manufacturers like BMW can go back to building Diesel and gasoline engines. But: the Tesla nightmare is not going to go away.

Announced Muscle Cars

BMW is falling more and more behind. The i3, an experiment that didn’t get much love inside BMW, although it was a really innovative car that drives very well, is just an expensive EV with not much range. It didn’t help that the management team behind it was poached by Chinese competitors.

Instead BMW announces electric muscle cars, which are supposed to hit the market – not in 2019, also not in 2020 – but in 2021. If we compare that to the promises and actual EVs that other manufacturers launched – all of them supposed ‘Tesla killers” – including the Mercedes EQC, Audi e-tron, and Jaguar iPace – and realizes the performance gap to Tesla, then we won’t expect much of BMW – whenever they will launch their vehicles.

Merger As Savior?

The merger of multiple initiatives between Daimler-Benz and BMW on the topics of car sharing or autonomous driving is an indication how little BMW has to show for. We don’t hear much about autuonmous driving. The test fleet announced for 2017 to drive in Munich has been utterly absent. And a company that doesn’t understand software is collaborating with another company that doesn’t understand software to develop – software? As an A-player in car manufacturing you have to collaborate with an A-Player in software. Here a small reminder of who are the A-players in developing autonomous software – and who’s not.

Or maybe, this merger of initiatives prepares for a bigger merger; the one between Daimler-BEnz and BMW. Both seem not to be able to lift those technology changes by themselves to be able to compete with the technology leaders.

All that costs money. Money they don’t have. BMW had to issue a profit warning in autumn 2018 because of the stricter WLTP emission tests that brought sales and revenue down. It didn’t help that an additional 106,00 vehicles had to be recalled in South Korea for engine fires.

Sometimes profit warning are coming in a pack. In 2019 BMW had to dedicate one billion Euro for expected penalties in the price fixing scandal with other German automakers. Money that they’d need for new technologies such as electric vehicles or autonomous driving. Or maybe even charging stations.

But here BMW is rather waiting for the German government – or the Lord. While others are busy increasing their charging station network – like Tesla – or have to build one – like Volkswagen that was tasked by a judge to spend two billion dollars over the next ten years to build a charging station network – the Munich BMW management is leaning back, and waiting for others. And from there it’s easier to voice critical comments about competitors and about your own customers.

Job Losses

Those comments are not coming out of nowhere. They are the result of the dramatic changes that are hitting the automotive industry. They are so palpable that the media isnot speculating anymore about the layoffs of thousands of people, but actually quoting numbers for different cities and companies. The German daily Handelsblatt sees 2,500 of 7,400 jobs at Bosch Bamberg as critical, and in Öhringen there are 240 jobs at Mahle don the cusp. That factory is expected to close in 2020. And in Stuttgart-Untertürkheim there are 11,000 jobs at Daimler endangered that today are building engines, transmissions, axles, and fuel cell systems.

Instead of full employment we see the ghost of mass layoffs reappearing. And those could easily tally up in the hundreds of thousands.

The arrogance and willful blindness of BMW management is not surprising, when you feel certain and safe. The 2018 numbers were the second best results in BMW history. So everything seems fine. Why change? But the change came in Q1 2019, when the automotive department experiences a loss for the first time in a decade because BMW’s involvement in the Diesel scandal. But management seems to blame that on a singular event, which is not going to repeat.

BMW management’s philosophy seems to be to retire early with a fat bonus and move into their villas at the Chiemsee. And after them the deluge. At the same time the BMW owners seem to have given up as well.

Powerless and Unwilling Owners

In a rare Interview in the German manager magazin the siblings and BMW heirs Stefan Quandt and Susanne Klatten, seem almost sweet. But in the interview BMW as a company is almost treated just as a side note. Nice but meaningless words are exchanged about the company and the relationship to the board, but the passion of the BMW heirs seems to be more with the portfolio companies that they bought themselves or started from scratch. Not only do they cover topics they are more interested, they also have more influence on those companies. With BMW the story is very different.

Although Stefan Quandt has warned in the past about the upcoming change, it didn’t have much impact. Especially when he is taking the easy route and dissing the ‘bad Silicon Valley’, juxtaposing it with the ‘good BMW’. Considering BMW’s involvement in the Diesel scandal quite a chutzpah. According to him the Silicon Valley is to blame, but nor BMW. ‘They’ have to change, but not BMW.

The more we look at it, the more obvious it is that BMW is neither morally nor technically superior, as much as they are telling themselves so. And they’ll be probably gone within the next decade. It would be an act of sportiness, if BMW just stepped of the gas pedal, and starts pushing the accelerator for electric vehicles. I am not giving up hope…

This article was also published in German.