Where is the BMW Group headed?

The BMW Group will build vehicles

In response to the question “Where is the BMW Group headed?”, BMW Magazine Digital casts a glance into the future of the company on the occasion of its 100th anniversary. The statement “The BMW Group will build vehicles” is the subject of the first in a series of essays. It may sound self-evident, but there can be no more stating the obvious. In the future, mobility will undergo a radical rethink. The key terms are digitisation, connectivity, automated driving and car sharing. The BMW Group’s strategy involves opening itself up to new business models and extending its tried-and-tested principle of sheer driving pleasure.

By
Adriano Sack

Monty, Rosinante, Quarkbrot, Gandalf: one in seven Germans have a pet name for their car. Half of all vehicle registration plates in Germany are personalised to some degree. Apart from their home, Germans spend more on a car than on any other item (basic food excluded, of course). So, it must be love. And there are few signs that things are any different in other parts of the world.

Put very simply: the car and the motorcycle cannot be compared with any other objects. They are intimate because we surrender to them and entrust them with our lives; and they are emotional, because acceleration and driving release adrenaline and endorphins and because we associate them with moments of happiness – from that exhilarating ride along an empty motorway, up a mountain pass or round a race track, to family excursions with the children and the excitement of seeing a fox crossing a country road.

Cars and motorcycles are immutably analogous products. For some years now, cars in particular have become increasingly networked, digitised and intelligent. But vehicles are still subject to the laws of physics, which dictate how masses (vehicle + driver + luggage) are conveyed from A to B.

It seems a truism to say “the BMW Group will build vehicles”. It is a statement of the obvious, all but superfluous and in need of no qualification from a company that produces and sells three of the most famous and best-loved car brands in the world: BMW, MINI and Rolls-Royce. But having spoken with managers in the BMW Group, having put out feelers in the industry and, by way of preparation for this series of articles, having studied recent reports on the automotive industry in great detail, I soon realised: there can be no more stating the obvious.

The car and the motorcycle cannot be compared with any other objects. They are intimate because we surrender to them and entrust them with our lives; and they are emotional, because acceleration and driving release adrenaline and endorphins and because we associate them with moments of happiness.

The reinterpretation of the car as a “computer on wheels” is almost a done deal. All manufacturers know that the new car market – mainly but not exclusively the premium segment – already demands fully networked vehicles.

The reinterpretation of the car as a “computer on wheels” is almost a done deal. All manufacturers know that the new car market – mainly but not exclusively the premium segment – already demands fully networked vehicles. But one aspect needs some clarification – and this is of existential importance. What happens to the data which cars collect about the roads, weather, traffic and, not least, its occupants? Who will make money out of this information? And how many new competitors will flood the marketplace?

As if that weren’t complicated enough, two separate revolutions are being debated simultaneously: first, the switch from internal combustion engine to alternative drive systems such as the electric motor, and second, fully automated driving. The BMW Group has not enjoyed uninterrupted success throughout its 100-year history. Past crises are deeply etched into the company’s psyche. But nobody at the company rests on their laurels in any case: each success is simply a gateway to the next challenge. This is worth stating in the light of the gratifyingly positive way things have gone in recent decades. This alertness and structural unrest that I noticed time and again during my research is probably not the worst mental prerequisite for the current upheavals and turbulent times that lie ahead.

Questioning the business model

In 2007, Norbert Reithofer, then Chairman of the Board of Management of the BMW Group, presented the Board’s “Strategy Number ONE”. Its core message read: “The shift in society requires new mobility solutions.” What sounds self-evident today, at the time required a rethink for the company as a whole. Visions and technical solutions were needed for a future in which the leading role would no longer be played by the petrol-powered car, as had been the case for most of the 20th century, and in which ownership of a car was no longer essential to demonstrate success and status or to play an active part in life, but instead would risk being scorned as an anachronism.

In other words, the challenge was – and is – one of questioning the business model, expanding it and replacing it if necessary with something else. This is what the BMW Group is now working on at all levels and in all markets – with the launch of BMW i, the successful car sharing service DriveNow and the ever more ingenious driver assistance systems, such as those found in the BMW 7 Series. For the jury is still out on whether or not in future we will all be driving only fully automated vehicles. The BMW Group brands traditionally represent the highly active driver, their vehicles designed for dynamic, authoritative performance: not for nothing is the BMW brand claim “sheer driving pleasure”. So for these reasons, the implementation of automated driving must be handled in a way that does justice to the brands, as well as to the expectations people have of them.

The BMW Group has opted for a differentiated strategy on the complex issue of automated driving. The Vision Vehicles, which were created as a foretaste of the future by the BMW and BMW Motorrad brands to coincide with the BMW Group’s 100th anniversary, do not render the driver superfluous. Rather, they support and strengthen him or her with a view to providing even greater driving pleasure. Thanks to the autonomous driving function, the Vision Vehicle from MINI fits perfectly into the traffic-dense urban environment; and with Rolls-Royce the entirely self-driving car becomes the ultimate luxury haven, a “Grand Sanctuary”.

But of one thing everyone at the BMW Group is certain: there cannot be a future without cars. No matter how successful the sharing community becomes, and no matter what alternative energy is used to power it – somebody has to manufacture the vehicles people choose to carry them through life. Just as in other sectors of industry, which at times have lost courage in the face of the modern digital age, one should never lose sight of one thing: if something is to be shared, it first has to exist. This is a standpoint the BMW Group will continue to espouse in future.

Digitisation notwithstanding, cars and motorcycles are immutably analogous products. They are still subject to the laws of physics.

The shifting values in society require new mobility solutions.

The shifting values in society require new mobility solutions.

In Munich they are proud of a certain inner disquiet. Yet what I encountered was a great deal of optimism and urgency in responding to the new challenges. Increasingly complex technology and diverse legal requirements on safety and fuel consumption raise the entry threshold for vehicle design. That means it will not be as easy for new competitors from Silicon Valley, for example, to break into the car market at the same breathtaking pace they set with gadgets, smartphones and social media applications. The design, assembly, production, service, marketing and sale of vehicles is a core competence which the BMW Group has built up over 100 years – and which will continue to define the company’s essence.

But the zeitgeist has changed and demands new concepts. The ideal has become the diverse and multifunctional city, in which cars, motorcycles, bicycles, pedestrians and mass transportation systems find a peaceful and symbiotic coexistence. But developments in recent years and prognoses for the decades ahead now question this ideal. As urban populations continue to expand, the manner in which they will live and move around these cities has to be renegotiated.

We also have to completely rethink how we get from A to B in the urban environment. It is obviously unrealistic to think that in future the millions of people streaming into the world’s cities – whether ancient or modern – can all have their own car and expect to park it outside their home. For cities of the future will increasingly be more than giant agglomerations of people and buildings. They will have to behave in the same way as successful businesses and global markets. Cities as different as New York and Singapore have shown where this journey may lead. Former New York Mayor Michael Bloomberg took up the mantle of his predecessor Rudolph Giuliani and, unafraid to take unpopular decisions thanks to a personal fortune worth billions, made the city even safer and cleaner. In Manhattan he radically reduced the volume of private cars. Just a few years ago the only cyclists were couriers and foolhardy pedal-pushers, while today the Big Apple is crisscrossed by cycle paths, dotted with pedestrian zones, and city bikes can be hired for a few dollars at every turn.

There has been a tangible change to the look and feel of the city. The same is true of Singapore. Not that there were any plans to rid it of its image as a spotless, stringent city-state. But with the development of spectacular hotels, top-notch cuisine and a wide range of leisure activities, Singapore is now an attractive environment for tourists and skilled workers alike. That’s because a war of talents is already brewing in the cities. Cleanliness, security and quality of leisure provision are factors that will increasingly determine where people want to live. In a world that revolves around business, a company’s principal asset is a workforce with the right people, so cities have to make themselves attractive. The economic resurgence of Berlin, for example, is closely linked to the staggering number of ambitious and eager young workers the city continues to attract.

What is needed is a complete rethink

These cities will also have to find new ways to regulate vehicle traffic. That process is already under way: London introduced a toll charge for vehicles entering the city centre some years ago; a smog alert in Beijing means private motorists can only use their car every other day; and in Manhattan, parking lots are now so scarce and/or expensive that the only people who own a car at all are those who cannot do without one or have no financial concerns. So increasingly car-free inner cities are a global trend that is set to continue in the years ahead. They offer more room for shops, parks, cycle paths – in other words, for those elements that make an active urban lifestyle attractive.

It is no different with the switch to electric mobility. Here the trend is set to intensify as soon as there is a city – most likely in California or Scandinavia, but possibly in China – that can convincingly demonstrate the success of alternative mobility concepts in the urban environment. Because electric mobility will be a decisive factor in creating the clean city of the future.

When it developed the BMW i3 and BMW i8, the BMW Group was the only premium company to have made a consistent and early play for electric mobility. In September 2015, the world’s leading motor show, the IAA in Frankfurt, demonstrated that other manufacturers were now entering the market with ambition and commitment. But public debate and general reporting are still dominated by a fear that the range of electric vehicles will be too restrictive. In some ways, this is reminiscent of the early days of the mobile phone, when battery life was the measure of all things. Nowadays we don’t think twice about charging a smartphone at every opportunity, whether we’re in a meeting, at the airport or in a restaurant. The battery life of the iPhone – now in its seventh generation, but still a little short of juice – does not appear to have done Apple any harm.

But things will not be as simple where electric vehicles are concerned. It will not be possible to charge up a vehicle at every power outlet, and the prospect of running out of power mid-journey is a little more dramatic than having to endure a short period without mobile phone reception. Prior to the launch of the BMW i models, the company analysed 20 million test kilometres clocked up by more than 1,000 test customers. Each drove a little over 40 kilometres per day on average and the vehicles were recharged two or three times a week, in the comfort of the driver’s own home. For the thing about electric mobility is it removes the separation between your own four walls and the road outside. The BMW Group comes home to its customers. The BMW vehicle looks after its owner’s energy management. It is recharged using the in-house photovoltaic system and, as necessary, feeds this stored energy – if not required for travel (the car is of course aware of planned journeys and meetings) – back into the system.

The car therefore plays a key part in the life management of the owner. It is networked to the fridge and will plan a route to a supermarket to stock up on required groceries. It knows the children’s timetable and their whereabouts. It provides an up-to-date weather bulletin at the breakfast table for the trip to work and will suggest an earlier departure if traffic is heavy.

That calls for some readjustment on the part of the customer, but the everyday benefits are obvious. And battery technology – on this all the experts are agreed – will increase significantly in the next few years. Technological progress always gathers pace when there is an identifiable market. Increasing competition in the area of electric mobility serves to accelerate development. Take just one example: the German automotive supplier Bosch acquired the Californian start-up Seeo in order to exploit its expertise in solid-state batteries. The objective: double the range, commercially viable within a few years.

Consumers have been hesitant until now. But for the cities there is no other way to achieve better organised and cleaner mobility. For this restructuring to take place, cities need partners like the BMW Group. However, it will no longer be enough in future just to offer cars with an electric drive. First, because urban mobility concepts are increasingly moving away from the car-centred model towards a multimodal system, in which the car, bicycle, public mass transit and pedestrians are ever more closely interwoven. And second, because the expertise of car manufacturers will also be extremely valuable on a range of broader issues.

Carmakers could make a crucial contribution to tackling mobility problems in major cities. For that reason they are important not just as mobility service providers and farsighted vehicle producers. Data gathered and transmitted by vehicles on the day-to-day transport habits of the city’s population are essential for developing alternative urban planning strategies.

Holistic thinking and responsible behaviour will be of increasing importance to the brands of the BMW Group, and could also be required by cities and municipalities because, in terms of mobility, urban living space is becoming ever more complex and fragile. What became clear over the course of many interviews is that the BMW Group sees these same alternative strategies and mobility concepts as an opportunity for developing new business areas: in future, exclusive self-driving cars could perform the role of a premium-class public transport system.

Car sharing and car parking services and the like can help to radically reduce the number of vehicles in inner cities. Cars currently remain unused for 95% of their service life, during which all they do is take up space, while 30% of active cars in cities are looking for a place to park. The ideal is therefore to have as few parked cars as possible – leaving space for cycle paths, plants and cafés, and for children to play. In other words, a better quality of life.

Carmakers could make a crucial contribution to tackling mobility problems in major cities. For that reason they are important not just as mobility service providers and farsighted vehicle producers.

04/04/2016