The BMW i3 stopped production, and European car companies lay flat

Author | Pan Lei

Edit | Zi Yu

Image source | BMW China WeChat public platform

In the summer of 2011, the German BMW Group held an unusual new car launch in Frankfurt.

In addition to all seven board executives led by CEO Norbert Rescheff, German Transport Minister Ramsauer also appeared at the event and delivered a speech.

The protagonists of this blockbuster conference are the pure electric i3 concept car and the plug-in hybrid i8 concept car launched by BMW.

Resef said BMW has created another milestone.

Klaus Dreger, director of the BMW Group in charge of research and development, also said that the i3 is a revolution in car design, the first mass production car with a body made mainly of carbon fiber materials.

But later facts showed that this "revolution" was limited to the BMW Group - other car companies did not regard the lightweight characteristics of carbon fiber as a mandatory route for new energy, but turned to lithium battery technology innovation.

After spending almost 10 years confirming that it had taken the wrong technical route, BMW first discontinued the i8 in mid-2020 and then planned to stop the i3 in July this year.

Li Ming, a senior person at BMW (China), confirmed the news that the i3 is about to usher in the final game, and said that the Leipzig plant that produces the i3 will also make major adjustments, and "the entire carbon fiber body production line may not be needed."

But he also stressed that the car has completed its mission, "this is just an image project."

Industry insiders believe that i3 is a "trial and error" for BMW, and now BMW has adjusted its course in time.

Rescheff's "Carbon Route"

Ritsev's BMW was one of the best periods for the development of this century-old luxury brand – he made BMW the world's number one luxury brand.

In 2014, a year before he left office, BMW's sales exceeded 2 million units for the first time.

But the CEO, an engineer with "mud in his fingernails and burn marks on the back of his hands," is not just thinking about real competitiveness, he's also worried about BMW's future — in his view, stricter environmental regulations in Europe will increasingly affect the products and innovations of car companies.

This was interpreted by BMW executives, led by Rescheff, as a "business threat."

Frederick Eichner, who later served as BMW's CFO, once said that BMW saw the threat to its business model and had to find solutions for the 7 Series, X5 and other major models.

The concept of this solution is somewhat similar to some of the research projects on the future of mobility that began in the early 2000s at the Massachusetts Institute of Technology (MIT).

According to MIT research, the use of lighter vehicles in urban environments can save a lot of energy.

This provides an idea for solving the thorny problem of electric vehicle endurance - that is, to create a car that is light enough, it can achieve a cruising range of close to 200 kilometers under the condition of a certain battery energy density.

In order to lose weight, MIT even launched a prototype car that even no one could sit in.

BMW hopes to solve the problem of vehicle weight through material lightweighting, rather than compressing the space inside the car indefinitely.

Under Rescheff's direct leadership, BMW has invested almost 2 billion euros to solve the technical problems of using carbon fiber materials for car bodies – a material that weighs only a quarter of steel but is 20 times stronger than steel.

This will significantly reduce the weight of the vehicle, while improving fuel economy, it is said that the weight of the car reduced by 100 kilograms, the fuel consumption of 100 kilometers can be reduced by 0.6 liters.

Eichner said bmw couldn't have made steel thinner, so it used carbon fiber.

This is the "carbon route" promoted by Rescheff, also known as the "lightweight route".

In his view, the changes brought by i3 to the automotive industry are similar to the disruptive changes brought by smartphones to the mobile communication industry.

Guided by this philosophy, BMW's designers even reflected some of the characteristics of smartphones in the design of the i3 - the black, glassy outer body of the i3 outlines the appearance of the phone, and when the taillights are on, it is like the phone is turned on.

In the technology roadmap set by BMW, the carbon route will be another material revolution in automobile manufacturing after the "all-aluminum body", and the automobile industry will also enter the "carbon age".

And the i3 followed the concept of carbon neutrality from the beginning, such as the production line is powered by four wind turbines outside the factory, the workshop uses intelligent ventilation system, and the roof can reflect sunlight to reduce artificial lighting, while 95% of the components can be recycled.

Everything went smoothly – BMW received as many as 8,000 orders before it officially brought the i3 to market in 2013 – although the car was not cheap, selling for around 35,000 euros in Europe and around $41,000 in the United States.

Ian Robertson, BMW's director of sales, said: "We made it very clear that from day one, the i3 can make money".

Tesla, which was mired in losses at the time, sold 22,500 units in 2013 and just over 3,000 in 2012.

i3 died in the wrong technology tree

What happened later showed that the i3, despite getting off to a good start, didn't get out of the rising sales curve that BMW expected.

The biggest problem was cost – under the conditions at the time, it cost $20 per kilogram of carbon fiber, compared to $1 for steel.

In order to solve the problem of high carbon fiber costs, BMW has promoted a costly supporting project.

A central step was the stake in carbon fiber producer SGL (about 16 percent), and the purchase of about 27 percent of BMW's family controller, Susan Klatten, to ensure absolute influence over the company.

BMW and SGL are also investing about $100 million to build a new plant in Moses Lake, Washington, to expand carbon fiber capacity, where electricity is only one-fifth of the BMW i3 assembly plant in Leipzig, Germany.

The carbon fiber produced at the Mosses lake plant will be transported to BMW's Wackerdorf plant in Germany and processed into "carbon fiber cloth", which will be sent to the Leipzig factory (i3) and the Landshut plant (i8) in Germany to make the kind of three-dimensional parts needed for the body.

Completing this complex process, BMW achieved an engineering miracle, but also paid a huge cost – from the production of carbon fiber to the i3 or i8 off the production line, the geographical distance alone is more than 5,000 miles.

BMW's plan is that as the scale of carbon fiber supply increases, especially other car companies can follow this area, the cost will be greatly reduced.

But in fact, most car companies are reluctant to venture into this field of uncertainty.

Audi is reluctant to make a desperate bet in the field of carbon fiber, but intends to use a mixture of aluminum, carbon fiber and steel to reduce the weight of the car.

At that time, Daimler wanted to develop fuel cell vehicles to solve the problem of endurance.

A senior R & D person from the car company told Chuang Chuangbang that this is one of the reasons why BMW originally "misproduced the technology tree", when Tesla and Daimler want to cut from the more certain entrance of battery innovation, bmw's choice of "carbon fiber route" faces too much uncertainty, and the cost is difficult to solve. "This proves that carbon fiber is not a body material suitable for large-scale manufacturing, except for some niche sports cars."

In other words, BMW's "carbon route" is based on the premise that the battery energy density is relatively constant, but it is precisely the rapid development of battery technology and the sharp decline in costs that make bmw's carbon route of huge investment gradually marginalized.

Public information shows that from 2010 to 2020, the price of power batteries will drop by more than 80%-85%, and the energy density will also increase from 90Wh/kg (lithium iron phosphate) to 160Wh/kg, an increase of nearly 80%.

Zeng Yuqun, chairman of CATL, said at the 2019 World New Energy Conference that the system energy density of power batteries can reach 250Wh/kg in 2025, and the price excluding tax can be reduced to 0.7 yuan /Wh.

In 2016, the price of power batteries was about 2-2.5 yuan / Wh, and in the fourth quarter of 2021, it has dropped to 0.84 yuan / Wh.

Correspondingly, according to the "2016 Global Carbon Fiber Composite Materials Market Report", the price of carbon fiber for vehicles in that year was about 18 US dollars / kg, and in 2020 it is still 18 US dollars / kg, and the price has not changed.

This puts the fate of i3 and i8 at stake.

In 2019, BMW's R&D director Frolich announced that there will be no follow-up models for the two cars, on the grounds that consumers have no real demand for pure electric vehicles, "(electric vehicles) are just the needs of regulators".

In mid-2020, the i8 was discontinued. By July this year, i3 will also usher in its final stop.

In this regard, Li Ming, a BMW (China) veteran who has worked at bmw headquarters in Germany for many years and understands the development history of the i brand, believes that BMW has never thought of making money by i3, and the only feasible route to improve the endurance of electric vehicles at that time was to reduce weight, and carbon fiber is the latest technology, but the cost is too high, so BMW spent two or three years looking for ways to reduce costs, "and finally established a production line in Leipzig."

In his view, BMW originally intended to promote carbon fiber to other models to improve versatility and reduce costs, but the effect was minimal, "even the i3 and i8 can not achieve synergy."

Based on the above factors, the BMW Group evaluated and believed that the i3 and i8 had completed their historical mission, but it took another two years to make the decision to stop production and dismantle the production line, because it was hesitant to provide new value in the end, "in the end, because the carbon route could not achieve scale effects, and could not make money by exporting carbon fiber parts, and idle assets also increased costs, so it decided to dismantle the production line."

He also stressed that the practice in the automotive industry is to outsource parts to reduce production costs, "so it is not cost-effective for BMW to maintain this production line on its own."

Xu Lide, former assistant to the president of Bo County Automobile, believes that i3 is a product with extremely poor product power, and (and) the cost is too high.

According to public information, the maximum cruising range of the i3 is 160 kilometers, but the price in China has reached 450,000-520,000 yuan.

This makes the i3 a toy for the rich.

In the same period, the range of Tesla Model S exceeded 400 kilometers, and the range of the e6 launched by BYD also exceeded 300 kilometers.

A senior industry insider who has had research and development experience in many car companies believes that the failure of i3 indicates that even large companies such as BMW are facing huge innovation risks.

Li Ming believes that the suspension of i3 and i8 cannot be completely defined as "failure", "BMW just wanted to establish a new image at that time, and also carried out useful explorations.".

The result of this "exploration" is that BMW's attitude towards fully promoting electrification has changed subtly and tends to be conservative.

An alternative gain from the failure of the "carbon route" of gambling

When the i3 was about to go public in 2013, Rescheff stressed that he would rank the car at the top of all other models, because other models were only "evolving", and the i3 belonged to the revolutionary category.

But as time went on, BMW began to be cautious about advancing electrification, no longer talking about "revolution" and "subversion" like Resef.

As Rescheff's successor, Harold Krueger also said that "the i3 can be profitable from day one", and with Rescheff also serving as chairman of the supervisory board of the BMW Group, he did not immediately shut down the costly i3 and i8 production lines.

But he quietly adjusted BMW's electrification strategy - postponing the launch of new "i" brand models, and gradually began to shift to plug-in hybrid and pure electric routes based on fuel vehicles, such as the iX3, which is not a carbon fiber selling point.

This pragmatic strategy has attracted a lot of criticism. Manfred Schoch, chairman of the BMW union, accused BMW of its electrification strategy in 2016 of being too conservative.

After Kruger left office, the new CEO Oliver Chiptzer said that he would vigorously promote electrification as soon as he came up, but in fact followed Kruger's route - synchronously promoting plug-in hybrid, pure electric and fuel vehicles, and continuing to implement "oil to electricity".

He also said he didn't plan to launch exclusive electric platforms like Mercedes-Benz and Audi — he, like Kruger, was a production director, and he was still thinking about saving money.

As a result, BMW vigorously taps the potential of existing production lines and promotes "flexible production", that is, putting electric vehicles or plug-in models on the same production line as fuel models – according to Udo Haenle, BMW's head of automotive engineering, it costs 1 billion euros to build a new pure electric factory, while it only costs 3 million euros to transform an existing plant to produce electric vehicles.

It was not until July 2020 that Chiptzer slightly changed its attitude toward electrification, announcing that BMW had officially set up a new division dedicated to creating a new platform for electric vehicles, which would be put into production in 2025.

This means that until 2025, BMW will stick to the current multi-technology route to obtain as much sales as possible.

From a data perspective alone, BMW clearly benefits from this conservative strategy.

According to data from technology research firm Canalys, about 6.5 million electric vehicles were sold worldwide in 2021, a 109% year-on-year increase, and the BMW Group gained 5% of the market share, ranking sixth among all car companies – the old rival Mercedes-Benz did not appear on the list.

Some industry insiders said that BMW has indeed seized the demand for plug-in hybrid models in the "transition stage" market, but the future medium- and long-term competitiveness still needs to launch a pure electric exclusive platform to cope with a new round of competition.

Will BMW be acquired directly?

As a century-old brand, BMW has suffered many market changes in history - but none of them can compare with the new energy technology changes currently underway, and the i3 has also suffered major setbacks.

As a big manufacturer, BMW has an unwritten tradition of selecting CEOs from among the executives in charge of production to ensure that its products are close enough to market demand, and from this point of view, the discontinuation of the i3 is both a stop loss and a correction.

But in Xu Lide's view, the prospects of European car companies, including BMW, are worrying. "They put too much emphasis on financial metrics. Europeans' forecasts for the future are also based on financial data, including investment in innovation. They attach great importance to the input-output ratio."

He stressed that the phenomenon of burning money for more than a decade for innovation, similar to Tesla, is basically impossible to see in European car companies, "innovation is precisely to burn money like a madman." And Tesla and China's new car-making forces are a small change in a year, a big change in three years, battery technology is a big change every year, this rhythm of European car companies can not keep up."

Talking about the deep-seated reasons why European car companies lag behind China and the United States in this wave of new energy technology change, he believes that the main reason is that there is a problem with the mode of thinking, (European car companies) have indeed achieved from 0 to 1 in the innovation of the automotive industry, and then they lie flat, "They have stopped innovating in the field of applied technology for a long time." And China's innovation characteristics are first-class ability to follow the trend, can make innovation from 1 to 100 to the extreme, and is not afraid of tossing, even if the head of the new forces fall, there are others continue to play with their lives. As for the United States, it is almost perfect, "from 0 to 1, but also constantly tossing and turning."

According to the California DMV's 2021 Autonomous Driving Road Test Report released in February, Chinese and American companies almost dominate the top 10 (5 Chinese companies are shortlisted).

In terms of power batteries, the top 10 global shipments in 2021 all come from East Asia, and there are also 5 companies from China, including the first Ningde era.

"The trend is on the side of the new car-making forces", Xu Lide believes that BMW and other European car companies do not rule out that they will be acquired. "The BBA (Mercedes-Benz BMW Audi) has no idea how to build a good car. Past successes have lost them."

Another executive from a joint venture car company also believes that Tesla's user needs are "absolutely impossible for BBA to give."

A Weilai owner told Chuangyebang that Li Bin (the founder of Weilai) used to shuttle through various cities every weekend to participate in car owner activities, "the owner has questions to answer on the spot, and give a timeline to solve the problem."

Another senior R & D personnel from the car company believes that the i3 is a normal trial and error for BMW. "This is also incomparable to new car manufacturers." [For new car manufacturers] a mistake of this level will be reversed."

He believes that the accumulation of traditional car companies for decades and hundreds of years is not in vain, and "competition has just begun."