BMW CFO: ‘The tipping point for ICE is already there’

BMW chief financial officer Walter Mertl said in a recent media roundtable BMW has passed the tipping point for combustion engine vehicle sales and now generates most sales growth from electric cars.

“The tipping point for the combustion engine is already there,” the CFO said, adding that, in his view, it had been passed last year. “The current sales plateau for combustion cars will continue and then fall slightly,” he predicted, pointing to looming environmental regulation that will restrict sales of such vehicles.

Ban fossil fuel sales

Carmakers are under pressure to ramp up their EV offerings as regulatory deadlines (in China, the European Union, and some US states) begin to ban sales of new fossil fuel-emitting cars from the middle of the next decade.

BMW achieved an almost 15% all-electric sales share last year. It plans to raise that to one-third by 2026 as it rolls out six new models in its ‘Neue Klasse‘ EVs, a huge and financially significant effort to bridge the technology gap with some competitors.

No margin parity before 2026

Still, BMW’s margins for ICE cars and EVs won’t reach parity until at least 2026, Mertl said, pointing to the higher costs of introducing new battery technologies for later models. Mertl added that discounting is also likely for cars in specific price ranges, but he did not provide further details.

The carmaker is sticking to its previously announced target of 3 million vehicles sold by 2030, with an 8-10% margin in its automotive segment, he declared. This conservative goal is below its expected 2023 margin of around 10,3%.

In September, BMW CEO Oliver Zipse said that the company would be “at least as profitable” when selling the ‘Neue Klasse’ EVs at scale, bolstered by their lower battery costs and higher efficiency per kilowatt hour. The first model of the New Class is expected in the second half of 2025.

Brilliance to withdraw from Chinese partnership?

There’s also BMW news coming in from China: Brilliance could withdraw entirely from the car joint venture with BMW, BMW Brilliance Automotive (BBA). According to an agency report, Brilliance’s parent company is considering selling its 25% share in the joint venture with BMW to raise its own capital.

The news agency cites anonymous sources familiar with the matter. It also states that several Chinese car manufacturers, including FAW, are involved in preliminary talks about the sale of the shares. As no final decision has yet been made, Bloomberg reports that BBA’s current shareholder structure could remain unchanged.

The current 75/25 ownership ratio came into force in February 2022. BBA had previously received the necessary business license from the Chinese authorities. Thus, extending the joint venture agreement until 2040, announced in 2018 under Harald Krüger, became effective simultaneously. BMW is said to have paid the equivalent of 3,6 billion euros for the 25% stake in Brilliance.

Expand production in China

BMW also wants to manufacture its ‘New Class’ electric cars in China. After the market launch in 2025, the next-generation electric vehicle models and the batteries they require will also be produced by BBA in Shenyang from 2026.

In August last year, BMW also presented a particular version of its 5 Series Sedan and the all-electric i5 for the Chinese market. Like many Chinese versions, the China offshoots have a longer wheelbase, more space in the rear, and specific design and equipment features. The 5 Series Sedan and the i5 for the Chinese market will also be produced at BMW Brilliance Automotive’s Dadong plant in Shenyang.

BMW will expand production in its BBA plant in Shenyang, China, with variants of the new 5 Series and (later) models of the ‘Neue Klasse’ /BMW

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