|October 15, 2013|
BMW Mulls Boosting Electric-Car Capacity on Early Demand
|Bayerische Motoren Werke AG (BMW), the world's biggest maker of luxury vehicles, is considering a production increase for the i3 electric car after early demand for the model exceeded the automaker's expectations. |
Customers have reserved more than 8,000 of the compact city car, which will cost $41,350 in the U.S., even before the battery-powered model hits European showrooms next month, Chief Financial Officer Friedrich Eichiner said late yesterday.
"If demand holds, which is what it's looking like, we will soon have to invest more," he said at a press conference in Amsterdam. BMW expects to sell more than 10,000 of the i3 next year and "will adjust capacity according to demand."
BMW's preliminary success is a positive sign for the entire industry. While automakers are rolling out scores of new electric cars, they have struggled with efforts to gain traction with alternative-drive vehicles amid consumer concern that powering systems offer only limited distance before a recharge is needed and objections to higher prices.
The i3 will go on sale in Germany for 34,950 euros ($47,440) on Nov. 16, followed by the U.S., China and Japan in the first half of next year. The model made its public debut July 29 at simultaneous events in New York, London and Beijing. The push to sell the electric car and recoup investments in the technology underpinning the vehicle include an international print, TV and Internet advertising campaign.
"The interest in the i3 electric car is generally a good sign," said Sascha Gommel, a Frankfurt-based analyst with Commerzbank AG. "BMW has already absorbed the research and development costs for the vehicle and the car is profitable. So every car sold contributes to profits."
The shares gained as much as 1.74 euros, or 2.2 percent, to 82.37 euros and were up 1.69 euros as of 10:41 a.m. in Frankfurt trading. The stock has climbed 13 percent this year, valuing the Munich-based manufacturer at $52.9 billion euros.
Volkswagen AG (VOW), Europe's biggest carmaker, outlined plans in September to offer as many as 40 electric or hybrid vehicles. The move by VW, which is just now bringing out alternative-drive cars, echoes a broader shift in the industry, with all major automakers at last month's Frankfurt auto show presenting electric or hybrid models for the first time.
Still, Renault SA (RNO) and partner Nissan Motor (7201) Co., which together are the car industry's largest producer of electric autos, will miss a 2016 deadline of 1.5 million deliveries, Carlos Ghosn, the head of both companies, said in early September. Deliveries of battery-powered cars by the French and Japanese manufacturers totaled 68,000 vehicles last year.
BMW is addressing concerns over so-called range anxiety with a unique option: the use of a sport-utility vehicle. Customers who buy the i3 have the option to purchase a feature allowing them to book a conventional auto like the full-sized X5 SUV for several weeks a year as a backup.
The maker of BMW, Mini and Rolls-Royce vehicles is upgrading its lineup with the i3, the new 4-Series coupe and a revamp of the X5 SUV to maintain its sales lead over VW's Audi and Daimler AG (DAI)'s Mercedes-Benz. Both competitors have vowed to surpass BMW in deliveries by the end of the decade.
The spending on development of new models and expanding production capacity caused the operating profit margin at BMW's auto division to narrow to 9.6 percent in the second quarter from 11.6 percent a year earlier.
"We'll have to work very hard to keep profitability within our target corridor" of 8 percent to 10 percent in the coming years because of large investments required to meet stricter emissions regulations and the weak car market in Europe, Eichiner said yesterday.
Sales gains in China and the U.S. have helped BMW cushion the effects of the sovereign-debt crisis on Europe's car market, which is sliding to a 20-year low. BMW, which doesn't anticipate a recovery in demand in its home region before the second half of 2014, expects global deliveries to rise this year for a third straight annual sales record.
"Demand in China and North America continues to be strong," Eichiner said. "It makes sense for us to think about expanding production capacity in North America," with the U.S. and Mexico both being options, he said.
The rollout of the i3 will go ahead as planned next month and won't be impacted by issues that typically affect the ramp up of a new model, he said. The executive was responding to a report by Wirtschaftswoche over the weekend that problems bonding carbon-fiber components for the car led to a 10-day production halt.