BMW will significantly increase its use of generic components and reduce reliance on bespoke parts as it seeks to lower costs and improve profitability, reflecting a strategy that has helped Chinese automakers gain a competitive edge. The strategy will be a ‘key lever’ in improving BMW’s earnings, the company told investors at its capital markets day last week.
Generic ‘industry best offer’ parts will account for the largest share of BMW’s annual €80 billion purchasing budget by 2032, surpassing bespoke components, whose share will be more than halved, BMW said. The company did not disclose figures.
“Purchasing at the BMW Group is evolving from a traditional procurement function into an architect of value creation,” BMW emphasized. BMW CEO Milan Nedeljkovic first outlined the shift in July, saying suppliers now offer more standardized components that meet the automaker’s requirements.
“We have to realize that the supplier offer has increased over time,” Nedeljkovic said. “There are industrial standards on the market that are convincing, and it would be wrong not to use them.” He added that BMW would never compromise on quality, performance, or brand-specific characteristics.
Financial goals
The parts strategy directly supports BMW’s financial goals. The company has set a medium-term target to raise margins in its automotive business to 3 to 5% by 2028, up from 2.3% in its latest results. After 2030, this must rise again to 8% or even 10%.
While BMW did not directly cite Chinese automakers as a model, many global carmakers are looking to replicate China’s success in reducing costs through greater parts standardization.
Developing an entirely new headlamp, for example, can add three months to a vehicle program compared with using modular components already widely available in the industry, Ford of Europe CEO Jim Baumbick agreed recently at the Automotive News Europe Congress before the Summer.
Toyota, Japan’s and the world’s number one car manufacturer, has also called several times for increased component sharing across Japan’s car industry and even beyond. “Sharing items ranging from steel grades and plastics to wire harnesses can free up resources for new technologies and productivity improvements,” former Toyota CEO Koji Sato insisted, speaking as the chairman of the Japanese Automobile Manufacturers Association (JAMA).
The Chinese threat
Automakers face growing pressure to cut costs as they compete with rapidly expanding Chinese rivals. China’s auto industry benefits from extensive standardization, supported by government-led specifications that extend beyond traditional safety, emissions, and software regulations.
The approach has allowed multiple Chinese brands to achieve scale at relatively low cost. It’s one reason Renault has established a substantial research headquarters in Shanghai, to learn how they manage both development and production.
The role of AI
As part of the overhaul, BMW also plans to deepen cooperation with key technology partners, saying existing collaborations have already improved supplier costs, supply security, and competitiveness. One example is the automaker’s work with Qualcomm on Level 2+ driver-assistance systems.
Next year, as a result of the development cooperation with Qualcomm, the BMW Group will be among the first manufacturers to offer navigation-guided driver assistance in Germany – on motorways, secondary roads and city streets – based on the new DCAS regulation (a Europe-wide legal framework for ‘Driver Control Assistance Systems’).
Other countries, including the US, will follow in stages. All customers driving the new vehicle generation will be able to activate the additional features over the air flexibly.
BMW also plans to expand the use of artificial intelligence within purchasing. The company said AI-powered analysis of procurement data will improve decision-making speed and quality, creating long-term structural cost advantages.
On the manufacturing side, artificial intelligence is already integral to the BMW Group’s production system and a core element of the BMW iFactory. “The BMW Group will transfer AI from individual applications to core vehicle development processes,” the manufacturer explains.
One example of this is the collaboration between the BMW Group and AI company Mistral on crash simulations. By combining the BMW Group’s engineering datasets with Mistral AI’s training capabilities, this collaboration enables the creation of specialized AI models that enhance the quality, speed, and efficiency of vehicle development.
“At the same time, to substantially reduce the effort involved across development, purchasing, and production, high-quality ‘Industry Best Offer’ solutions – representing an optimal combination of innovation and scalability – will also be more widely used in the future,” BMW emphasizes. “This will allow the BMW Group to focus its expertise and capacity more on the areas that most strongly differentiate its own brands from the competition.
From software-defined to AI-defined
“With the first models of the Neue Klasse, BMW has laid the foundation for the next generation of digital vehicles. The new zonal electrical and electronics infrastructure will be used across all vehicle segments. This will reduce complexity, leverage economies of scale, and make new functions available to customers faster,” BMW explains.
“The Neue Klasse already demonstrates how intelligent software and artificial intelligence optimize the customer experience. They create the ideal basis for the next phase of development: the AI -defined vehicle.”
“Here, the focus is no longer on individual functions, but on the intuitive interaction of the whole vehicle across all vehicle domains. From driver assistance to infotainment to basic and comfort functions, all systems work together seamlessly and intelligently, according to the situation,” BMW concludes.
