Where is the BMW Group headed?

The BMW Group will build vehicles

Where is the BMW Group headed? On the occasion of its 100th anniversary, BMW Magazine Digital casts a glance at the future of the company. The statement “The BMW Group will build vehicles” is the subject of the first in a series of essays. This may sound self-evident, but it’s worth stating the obvious because, in the future, mobility will undergo a radical rethinking. The key terms are digitization, connectivity, automated driving and car-sharing. The BMW Group’s strategy involves opening itself up to new business models and extending its tried-and-true principle of sheer driving pleasure.

By
Adriano Sack

Monty, Rosinante, Quarkbrot, Gandalf: In Germany, one in seven drivers have a pet name for their car. Half of all vehicle registration plates are personalized to some degree. Other than their home, Germans spend more on a car than on any other item (except food). So it must be love – and there are few signs that things are any different in other parts of the world.

Simply put, 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. They are emotional, because acceleration and driving release adrenaline and endorphins, and also because we associate them with moments of happiness – from that exhilarating ride along an empty highway, up a mountain pass or for some, around a racetrack, to family excursions and even the delight of simply seeing a fox cross a country road.

Cars and motorcycles are analog products – hands-on, mechanical. However, cars in particular have become increasingly networked, digitized and intelligent. But vehicles are still subject to the laws of physics, which dictate how masses (vehicle + driver + luggage) are conveyed from point A to point B.

Saying “the BMW Group will build vehicles” is stating the obvious, coming 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 having studied recent reports on the automotive industry in great detail, I soon realized: there’s more to this than just 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 also because we associate great vehicles 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 – especially, though 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 – especially, though not exclusively, the premium segment – already demands fully networked vehicles. But one aspect, of existential importance, needs some clarification: what happens to the data that cars collect about the roads, weather, traffic and, not least, 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 the internal combustion engine to alternative systems, such as the electric motor; and second, fully automated driving.

Throughout the ups and downs of its 100-year history, the BMW Group has never rested on its laurels; 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 during my research for this article is an apt indicator of the current upheavals and turbulent times that lie ahead.

Questioning the business model

In 2007, Norbert Reithofer, then-chairman of the BMW Group, presented the Board of Management’s “Strategy Number ONE.” Its core message read: “The shift in society requires new mobility solutions.” What sounds self-evident today required, at the time, a rethinking of 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 gasoline-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 ever more ingenious driver-assistance systems, such as those found in the BMW 7 Series. The jury is still out on whether or not we will all be driving only fully automated vehicles in the future, but the BMW Group brands traditionally represent the highly active driver, with vehicles designed for dynamic, authoritative performance. Not for nothing is the BMW brand claim “The Ultimate Driving Machine.™” So for these reasons, the implementation of automated driving must be handled in a way that does justice to the brands and the expectations that people have of them.

The BMW Group has opted for a differentiated strategy on the complex issue of automated driving. The Vision Vehicles – created as a taste 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 the driver in providing even greater pleasure behind the wheel. 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 everyone at the BMW Group is certain of one thing: there cannot be a future without cars. No matter how successful the ride-sharing community becomes, and no matter which alternative energy is used to power it, somebody has to manufacture the vehicles that people choose to use. As in other industrial sectors – which, at times, have retreated in the face of the digital age – if something is to be shared, it still first has to exist. This is a standpoint the BMW Group will continue to maintain in future.

Digitization notwithstanding, cars and motorcycles are analog products, subject to the laws of physics.

Shifting values in society require new mobility solutions.

Shifting values in society require new mobility solutions.

At BMW’s headquarters in Munich, one can feel a certain inner disquiet. Yet I also encountered 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 enter the car market with 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 that 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-transit systems find a peaceful and symbiotic coexistence. But developments in recent years and predictions for the decades ahead now question this ideal: as urban populations continue to expand, how they will live and move around these cities has to be rethought.

We also have to completely rethink how we get from point A to point B in the urban environment. It is obviously unrealistic to assume that, in the future, the millions of people streaming into the world’s cities can all have their own car and expect to park it outside their home. 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, Rudy Giuliani, and – unafraid to make unpopular decisions, thanks to the security of his own personal wealth – 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 peddlers; today the Big Apple is crisscrossed by bike paths and dotted with pedestrian zones, with city bikes that can be rented for a few dollars everywhere you look.

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 amount of leisure time 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 comprised of the best people – and 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 rethinking

These cities will also have to find new ways to regulate vehicle traffic. That process is already underway: London introduced a toll charge for vehicles entering the city center some years ago; a smog alert in Beijing means private motorists can only use their cars 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. Increasingly car-free inner cities, then, are a global trend that is set to continue in the years ahead. They offer more room for shops, parks, bike 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. Undoubtedly, electric mobility will be a decisive factor in creating the clean city of the future.

When the BMW Group developed the BMW i3 and BMW i8, it 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 travel 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.

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 cellular reception. Prior to the launch of the BMW i models, the company analyzed 12 million miles clocked up by more than 1,000 test customers. Each drove about 25 miles a day on average, and the vehicles were recharged two or three times a week in the comfort of the driver’s own home. The crucial thing about electric mobility is that it removes the separation between your own four walls and the road outside, and this lets the BMW Group “come home” with its customers. The BMW vehicle looks after its owner’s energy management: it is recharged using the in-house photovoltaic system (from the home’s solar panels) – and, if not required for travel (the car is, of course, aware of planned journeys and meetings) can feed this stored energy 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 will increase significantly in the next few years – on this, all the experts agree. Technological progress always gathers speed when there is an identifiable market, and increasing competition in the area of electric mobility is serving to accelerate development, as well. Take just one example: the German automotive supplier Bosch acquired California startup Seeo in order to exploit its expertise in solid-state batteries. Its goals: to double travel range and to be commercially viable within a few years.

Consumers have been hesitant until now – but for big cities, there is simply no other way to achieve better-organized and cleaner mobility. For this restructuring to take place, cities need partners like the BMW Group. However, it will no longer be enough in the future just to offer cars with an electric drive. First, urban mobility concepts are increasingly moving away from the car-centered model towards a multimodal system in which the car, bicycle, public transportation and pedestrians are ever more closely interwoven. But second, the expertise of car manufacturers will 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 – and 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 behavior will be of increasing importance to the brands of the BMW Group. It 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 the future, exclusive self-driving cars could perform the role of a premium-class public transportation system.

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

For more about REINVENTING THE WAY YOU RIDE join us in Santa Monica this October. Go to bmwusa.com/next100 to register.

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

09/28/16