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A BMW logo on an i3 electric car

BMW’s New Electric Car Set for 2021, Lags Behind Audi, Mercedes

May 13, 2016
Few electric cars have excited the general public (other than the Tesla Model 3, of course), but will BMW’s decision to allow eight years to pass between the introduction of its current i3 and i8 models and its planned flagship iNext hurt the company?

BMW AG’s response to the challenge posed by Tesla Motors Inc. will be ready in 2021, years after Audi and Mercedes-Benz plan to roll out their own long-range electric vehicles.

With Tesla planning to enter the mainstream of the luxury-car market with the Model 3 next year, BMW is bringing out the iNext, which will supplant the 7-Series sedan as the brand’s flagship model. The vehicle will come eight years after introducing the squat electric-powered i3 city car in 2013.

The iNext will be “our new innovation driver, with autonomous driving, digital connectivity, intelligent lightweight design, a totally new interior and ultimately bringing the next generation of electro-mobility to the road,” CEO Harald Krueger said Thursday at the annual shareholders meeting of the 100-year-old company. “We have always stressed that our centenary is a springboard to the future.”

The new model is the centerpiece of BMW’s effort to defend its position in the luxury-car market as changing consumer tastes challenge the German manufacturer’s focus on high-speed Autobahn thrills. BMW is responding to pressure from Tesla and traditional rivals like Daimler AG’s Mercedes as well as the risks posed by Apple Inc.

As part of a broader strategy shift, BMW is also expanding into mobility services to take on the likes of Uber Technologies Inc. as owning a vehicle becomes less important to city-dwelling consumers. The German manufacturer started a car-sharing program in Seattle last month that offers the option of a chauffeur service as well as people renting out their own vehicles.

The iNext will lag behind similar efforts by key rivals Mercedes and Volkswagen AG’s Audi. Both plan to offer models that can cover at least 310 miles on a single charge by 2018. Audi will build its first all-electric car as well as the battery at Audi’s factory in Brussels. 

“Starting in 2018, we will launch another electrified car each year,” Audi CEO Rupert Stadler said Thursday at the Volkswagen unit’s annual shareholders meeting in Ingolstadt. “By 2025, we will see fully automated driving.”

BMW’s decision to allow eight years to pass since rolling out the i3 follows sluggish sales for the 160 kilometer-range vehicle, which failed to excite customers in the way Tesla’s electric Model 3 sedan has done.

The rush of reservations for Tesla’s $35,000 Model 3 has highlighted the risk posed to BMW and other upscale carmakers, which rely on a reputation for innovation to charge customers more than mass-market competitors. Since 2013, BMW has sold about 50,000 i3s and i8 plug-in hybrid sports cars, while Tesla got 400,000 deposits for its most mainstream model in the weeks after the March 31 unveiling of the prototype.

To be sure, aside from Tesla’s vehicles, no electric cars have sold well. That’s prompted BMW to plan a significant expansion of its high-performance M line to help finance investment in electric powertrains and other technology that may not pay off for years.

Still, investors questioned BMW’s strategy of waiting years to expand its electric-car lineup and fight Tesla on driving range after pioneering the mass-market production of carbon fiber for the chassis for the i3 and i8.

“Can you afford to wait until 2021 to unveil the BMW iNext and still be competitive?” Daniela Bergdolt, vice chair of German shareholder protection association DSW, asked Krueger at the meeting. “I sense you used to be early when it comes to e-mobility, and now there’s a sense you’re somewhat discouraged.”

BMW is set to lose its ranking as the world’s best-selling luxury-car brand this year for the first time since 2005. Mercedes, benefiting from a rejuvenated product lineup, took the lead during the first quarter, when sales rose more than twice as fast as BMW’s.

The battle to stay in the lead contributed to incentives to entice buyers to BMW’s relatively older cars. The average price of BMW’s vehicles declined 5.9% to about 33,700 euros ($38,078) in the first quarter as demand for cheaper cars like the X1 compact SUV powered past sales of the revamped 7-Series sedan, according to Bloomberg calculations. BMW’s current top-of-the-line model, on sale since October, has failed to trouble the dominance of the competing Mercedes S-Class, which came out in 2013.

“The 7-Series isn’t getting anywhere against the S-Class so far,” Ingo Speich, a fund manager at Union Investment, said at the meeting. “It’ll probably be until 2018 until we see new impetus in terms of design, operating concept and interior with the new 3-Series.”

By Elisabeth Behrmann and Christoph Rauwald

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Licensed content from Bloomberg, copyright 2016.

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