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BMW Group sets strategic course under challenging conditions

Auto News - Published on Tue, 19 Mar 2019

Image Source: BMW Group PressClub
In the course of a challenging financial year 2018, the BMW Group made important strategic decisions set to secure its long-term success. As part of the company’s Strategy NUMBER ONE > NEXT, the green light was given to launch a new product offensive in the upper luxury class and the cornerstone was laid for additional expansion of the company’s presence in China, the world’s largest automobile market. With the BMW Vision iNEXT, the Group also presented its new technology flagship, which integrates the key future-oriented topics of autonomous driving, connectivity, electrification and services. The BMW Group continues to systematically broaden its range of electrified models and is increasingly focusing on co-operations in the fields of mobility services and autonomous driving. At the same time, especially during the second half of the year, business performance was impacted by significant challenges relevant to the entire sector, and which are expected to accompany the BMW Group beyond 2018.

Mr Harald Krüger, Chairman of the Board of Management of BMW AG, in Munich said that “2018 was a challenging year for the automotive sector as a whole. Nevertheless, we achieved the second-highest Group profit to date. The challenges facing the entire sector are unlikely to diminish in the coming months. Great efforts will therefore be needed across the entire Group to help shape the sector’s transformation under such conditions.”

Alongside the challenges facing the entire industry over the past year, from the BMW Group’s perspective, ongoing international trade conflicts also contributed to a tightening market situation and greater uncertainty. Moreover, the shift to the new WLTP test cycle caused significant supply distortions on several European markets, leading to unexpectedly intense competition. In the third quarter of the financial year 2018, increased statutory and non-statutory warranty measures resulted in significantly higher additions to provisions in the Automotive segment.

Mr Nicolas Peter, Member of the Board of Management of BMW AG, Finance said that “We expect strong headwinds to continue to effect the entire sector in 2019. However, we are tackling these various challenges systematically, in order to emerge from them even stronger than before. This is why we launched our Performance > NEXT programme back in 2017 with the aim of optimising performance, improving structural efficiency and reducing complexity wherever possible. In view of current developments, we intend to further broaden and significantly intensify these efforts.”

The BMW Group currently sees challenges in various areas, including political uncertainty, a cooling global economy (partly due to international trade conflicts), rising production costs to meet regulatory requirements, exchange rate effects and rising raw materials prices. To counteract these negative factors, measures already in place to reduce product portfolio complexity are being expanded and also applied to model derivatives. For example, despite a good level of demand, no successor model will be developed for the current generation of the BMW 3 Series Gran Turismo.

Despite the demanding conditions, the BMW Group continues to invest substantial amounts in the mobility of the future. At EUR 5,029 million, capital expenditure in 2018 was 7.3% above the previous year’s high level (EUR 4,688 million). The Capex ratio rose to 5.2% (2017: 4.8%). Investments included work connected with the introduction of new models in the Spartanburg, Dingolfing and Munich plants and building of the Group’s plant in Mexico. As planned, research and development expenses in 2018 were significantly higher than in the previous year and totaled EUR 6,890 million (2017: EUR 6,108 million; +12.8%). R&D expenditure for the year was therefore equivalent to 7.1% of Group revenues (2017: 6.2%). In addition to ramping up the roll-out of new models, the focus is also on future-oriented topics such as autonomous driving and the systematic expansion of electric mobility.

With more than 350,000 units (over 130,000 fully electric vehicles and more than 220,000 plug-in hybrids) delivered to customers up to the end of 2018, the BMW Group is already a leading supplier of electrified vehicles. At the beginning of March, the new plug-in hybrid versions of the BMW 3 Series, BMW 7 Series, BMW X5 and BMW X3, which now come with extended electric range, were showcased at the Geneva Motor Show. By the end of next year, the BMW Group will have more than ten new or revised models equipped with fourth-generation electric drivetrain technology (“Gen 4”) on the roads.

By the end of 2019, these will include the all-electric MINI Electric manufactured at the Oxford plant and, from 2020, the BMW iX3, which will be produced for the world market in Shenyang, China. Together with the pioneering BMW i3, the BMW i4 and the BMW iNEXT, the Group will have five all-electric models on the market by 2021 and the number is scheduled to rise to at least twelve models by 2025. Including the rapidly growing range of plug-in hybrids, the BMW Group’s product portfolio will then comprise at least 25 electrified models.

This wide range of electrified models on offer will be made possible by highly flexible vehicle architectures and an equally agile global production system. Going forward, the BMW Group will be capable of manufacturing models with all-electric (BEV), hybrid-electric (PHEV) and conventional (ICE) drivetrains on one production line. The ability to integrate e-mobility in its production network will enable the BMW Group to respond even more flexibly as demand grows. In 2018, the BMW Group delivered more than 140,000 electrified vehicles to customers. By the end of this year, the company expects to have an overall total of more than half a million electrified vehicles on the roads.

The BMW Group is currently developing the fifth generation of its electric drivetrain, in which the interplay of electric motor, transmission, power electronics and battery will be further optimised. Integrating the electric motor, the transmission and power electronics also plays a role in cutting costs. Furthermore, the electric motor does not require rare earths, enabling the BMW Group to reduce its dependence on their availability. The fifth generation of the Group’s electric drivetrain technology will be installed for the first time in the BMW iX3 from 2020.

The BMW Group believes long-term partnerships within a flexible, scalable, non-exclusive platform are key to advancing the industrialisation of autonomous driving. As early as 2016, the BMW Group established a non-exclusive platform with technology specialists, suppliers and OEMs to take the technology to series maturity and has now successfully consolidated work in this area at the Autonomous Driving Campus in Unterschleißheim, near Munich. The generation of technologies currently under development will go into series production as Level 3 automation in the BMW iNEXT in 2021, this vehicle will also be Level 4-enabled for pilot projects.

The BMW Group has joined forces with Daimler AG to advance the development of the next generation of technologies needed for autonomous driving. At the end of February, the two companies signed a Memorandum of Understanding (MoU) to jointly develop the technologies that are vital for future mobility. Initially, the focus will be on advancing the development of next-generation technologies for driver assistance systems, automated driving on highways and parking features (in each case up to SAE Level 4).

The BMW Group and Daimler AG view their partnership as a long-term, strategic cooperation and aim to make next-level technologies widely available by the middle of the coming decade. Combining the outstanding expertise of the two companies will boost their joint innovative strength. Moreover, it will both accelerate and streamline the development of future technology generations. The development of current-generation technologies and the ongoing collaborations both companies have in this field will remain unaffected and continue as planned. Both parties will also explore additional partnerships with other technology companies and automotive manufacturers that could contribute to the success of the platform.

The BMW Group and Daimler AG are also working together in the field of mobility services, creating a new global player that provides sustainable urban mobility for its customers. The two companies are investing more than one billion euros to develop and more closely intermesh their offerings for car-sharing, ride-hailing, parking, charging and multimodal transport. The cooperation comprises five joint ventures: REACH NOW (multimodal), CHARGE NOW (charging), FREE NOW (ride-hailing), PARK NOW (parking) and SHARE NOW (car-sharing).

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Posted By : Rabi Wangkhem on Tue, 19 Mar 2019
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