As BMW car bodies slid down an assembly line in Munich recently, showered with sparks from robotic welders, it was hard to tell which cars were powered by batteries, fuel-burning engines or both. In the view of many analysts, that is not a good thing.
The German automaker’s electric vehicles are built on the same assembly line as the gasoline vehicles and look identical from the outside. That strategy, using the same basic body for electric, hybrid, gasoline and diesel cars, was viewed as an awkward and inefficient compromise put in place by some established automakers as they struggled to compete with Tesla. and to emerging Chinese automakers that are making cars designed solely for battery power.
But confounding the experts, BMW’s strategy paid off. The company sold 376,000 electric vehicles last year, including some under its Mini brand, a 75 percent increase from the previous year. In the luxury segment, BMW was second only to Tesla, which remained dominant with 1.8 million cars. Electric vehicles will account for 15 percent of BMW’s sales by 2023, up from 9 percent last year.
The company’s growth comes as sales of electric vehicles have increased at a slower pace overall around the world. What’s even more surprising is that BMW, unlike General Motors or Ford Motor, has made a profit on the electric cars it sells.
BMW’s experience suggests there is hope for at least some established carmakers as Chinese carmakers such as BYD begin exporting cars to other countries in Asia, Europe and Latin America. . As electric cars take off, the popularity of BMW cars suggests that many buyers value the familiarity and craftsmanship of long-established carmakers and remain wary of newer brands.
If so, BMW’s approach could show the way to other automakers that have been building cars for decades but have made little progress in transitioning to battery-powered vehicles.
BMW’s strategy bought the company time to develop expertise in battery technology and design a line of cars specifically to be electric. This has helped the company, which is based in Munich, cope with changes in demand as it is easier to dial up or down the production of different types of cars.
The strategy also helped BMW hang on to customers who were interested in electric propulsion but weren’t ready for a drastic break from the past. The company offers hybrid versions of some of its most popular models, saying buyers should be able to choose a car’s propulsion technology as easily as choosing its color.
“We lose our traditional customers if you tell them, ‘You’re part of the old world,'” Oliver Zipse, BMW’s chief executive, said in an interview, referring to people who still prefer combustion engine vehicle. “They will defect immediately.”
Next year, BMW will begin selling a new line of cars designed to run solely on batteries. Last month, at a site overlooking a rocky, wave-lashed coast north of Lisbon at a company event, Mr. Zipse prototypes of a sedan and a crossover sport-utility vehicle that are part of what the company calls the Neue Klasse, or New Class.
These cars will offer significant improvements over current models, including batteries that store 20 percent more energy per pound, and features not available from Tesla, such as a digital display which runs along the entire lower edge of the windshield.
The display, which can be customized, provides drivers with information about speed, range, weather and navigation without having to take their eyes off the road, and eliminates the need for a front instrument cluster steering wheel. Most Teslas have a large display in the center of the dashboard, requiring drivers to look to the side to see maps and other information. That screen also has many of the car’s controls.
In addition, the new BMWs are available with autonomous driving technology that allows drivers to take their hands off the wheel on freeways and change lanes just by glancing in the side mirror. That feature directly challenges Tesla’s vaunted self-driving technology.
Since Tesla proved in the last decade that electric cars are practical and fun, it’s been an open question which car companies will lead the industry. Tesla, with its roots in Silicon Valley, has led the way in software and battery technology but has struggled with manufacturing and introducing new models. Established car companies have decades of manufacturing experience but face a steep learning curve with batteries and software.
BMW is likely to survive this heavy shift to electric vehicles because of its engineering expertise, strong brand and profit margins that have allowed the company to invest in new technology, says Matthew Fine, a portfolio manager at Third Avenue Management, an investment firm that owns. Shared by BMW.
“We thought that would give them a very good fighting chance,” said Mr. Fine. “And that seems to be true so far.”
The luxury carmaker has begun the transition to electric vehicles with several advantages. The brand has recently taken the lead Consumer Reports’ ranking of auto brands producing the best cars for the second year in a row. Tesla ranked 18th out of 34 brands on the list.
But Tesla has a big advantage. The Tesla Model S, which starts at $75,000, can go more than 400 miles on a charge, according to the Environmental Protection Agency, compared to about 320 miles for a BMW i7, which starts at more than $100,000. BMW says its next generation of cars should more than erase that deficit with smaller batteries that provide 30 percent more range.
Tesla may be weak in some areas. Shares of the company, led by Elon Musk, have lost more than half their value since their peak in 2021. BMW shares have gained about 17 percent over the same period. Wall Street still values Tesla at more than eight times BMW’s stock market value.
Tesla’s lineup is dated by automotive standards. The company recently began selling an upgraded version of its Model 3 in the United States, but it hasn’t introduced a completely redesigned sedan or SUV since 2020. Tesla is making its latest model, the Cybertruck, available for sale last year, in limited numbers.
“Newcomers,” said Mr. Zipse without mentioning Tesla, “if they are not careful, they may grow old before they grow up.”
A ride in an i7, an electric incarnation of BMW’s top-of-the-line sedan popular with politicians and corporate executives, offers a lesson in the creature comforts central to the company’s appeal. The car, which looks almost identical from the outside to its internal combustion counterpart, is eerily quiet even at highway speeds. The car has a large video screen that folds down from the ceiling.
Mr. argued. Zipse that BMW is not just an automaker. “BMW, yes, it’s a car company,” he said. But, he added, “In essence, it is a technology company that has the ability to combine different technologies into one product.”
In Munich, BMW is demolishing buildings used to produce internal combustion engines to make room for assembly lines that will produce Neue Klasse cars. The last V-8 rolled off the assembly line last year.
BMW buys most of its batteries from suppliers such as China’s CATL, which also sells to Tesla, but develops its own technology. In a building with blue and gray corrugated metal walls in the Munich suburb of Parsdorf, BMW operates a mini-factory where it tests new battery designs and manufacturing processes. One innovation involves allowing a slurry containing lithium and other active ingredients to be mixed in a continuous flow rather than in batches, the current practice. The process is faster and cheaper.
Starting in 2027, BMW will make nothing but electric cars in Munich, although it will continue to build models with internal combustion engines at other factories. The company has large plants in Shenyang, China; Spartanburg, SC; and other European locations. BMW says it will start making electric cars in the United States by the end of the decade.
Unlike Audi and other competitors, Mr. Zipse to put an expiration date on internal combustion engines, drawing criticism from environmental groups.
“BMW can lead the European auto industry in the electric car transition if it makes a clear commitment to ending the production of climate-damaging internal combustion engines,” said Benjamin Stephan, an expert on transportation to Greenpeace in Germany, in an email.
But Mr. Zipse said the future of the industry is clearly electric. Sales of BMWs with engines are up, he said. “The fastest growing segment is electromobility,” Mr. Zipse said. Electric vehicles, he added, “will be a dominant force in the market.”
