Wednesday, July 24, 2013

BMW takes a gamble as it prepares to blaze a trail with luxury electric cars

With a range of less than 100 miles and a hefty price tag, it is little wonder that BMW's first electric cars are described by the company's chief executive as a "calculated risk."
Sales of battery-powered vehicles are rising but from a very low base. Last year drivers in the UK bought just over 1,200 all-electric cars compared with nearly 2m petrol or diesel cars.
The world's biggest luxury car maker unveils its first electrical offering, the i3, on Monday. It is the first in a series of electric cars from the German car maker and boasts a range of innovations including a lightweight shell of carbon fibre-reinforced plastic.
BMW is gambling that drivers will soon be ready for a premium version of the all-electric car, which has so far gained only a tiny sliver of the market.
Sales of battery-powered vehicles are rising but from a very low base. Last year drivers in the UK bought just over 1,200 all-electric cars compared with nearly 2m petrol or diesel cars.
Both the high price of the first electric cars and fears of being stranded at the roadside by a flat battery have acted as a deterrent, analysts say.
BMW predicts that, as people increasingly move to live in cities and governments get tou"More and more people are living in cities, with restrictions on travelling into the city – both emissions and access," a BMW spokesman said.
"As time goes on, these legal restrictions will become ever tighter.
"We've looked at the driving profiles of people in metropolitan regions and a car with a range of 150km [93 miles], which needs to be charged two to three times a week, is something which meets people's needs completely."
In an attempt to assuage customers' fears about range, the i3 will come as part of a package deal that includes the loan of a petrol car for use in holiday driving. A similar deal is being offered by Fiat, whose 500e electric model comes with 12 days a year of alternative transport in a conventional car. Drivers of the i3 will also be able to plug in a small petrol engine that extends the car's range to around 180 miles.
For BMW, the i3 is an opportunity to re-invent the luxury car. Luxury is "not about being able to drive thousands of miles but about the quality of the vehicle, a special design and taking pleasure in driving," the BMW spokesman said.
The i3, he added, "is still recognizably a BMW but a different BMW from all the others". Its specifications suggest that it will be a sporty and agile urban car. It boasts acceleration from 0-60mph in about seven seconds and a tight turning circle of just 32 feet. Like all electric cars, it has "instant torque" – the entire force of the engine is available as soon as the accelerator pedal is pressed.
Analysts suggest BMW is attempting to create a new market in premium electric cars. As yet, it has few rivals.
Californian electric car maker Tesla recently posted its first quarterly profit, sending its share price soaring, and expects to sell around 21,000 of its model S sedans this year. General Motors is also targeting affluent electric motorists with the Cadillac ELR.
But Nissan, the market leader in electric cars with the Leaf, recently announced that it was putting on hold plans to develop a luxury model. The Japanese carmaker said it was postponing development of the Infiniti LE so that it could make use of the latest advances in electric vehicle technology from the outset.
Christoph Stuermer, research director for vehicle maker strategy at analysts IHS automotive, said: "BMW is a premium brand and a premium brand always means that you have to be at the pinnacle of technology.
"There is no market for electric cars, so what the i3 is trying to do is to establish a more widely seen and widely accepted standard for electric vehicles, thereby creating the market from the very outset.
"The first to get it right is the one who's going to benefit."
When the car goes on sale from November, it will cost £25,680, taking into account a £5,000 government grant for electric vehicles.
Buyers of the i3 are likely to be people with a range of transport options, Mr Stuermer suggested. "They will use a plane or train for business travel, cars basically for work or driving out to the supermarket or their primary car is their company car."
An expansion of the network of charging stations is key to the success of electric cars. The after-care package for the i3 includes supplying and installing a wall charging point at home, while an onboard navigation system will help customers find the nearest public charging station.
In future, BMW plans to assist stranded drivers with mobile recharging equipment.
Making sure their cars are powered will require a change of attitude from drivers, Mr Stuermer suggests. Instead of making time to top up their petrol tanks while driving, drivers will get used to charging battery-powered cars when they are not in use, as they do with mobile phones.
Urging them to support electric car technology, BMW's chief executive Norbert Reithofer told shareholders in March: "Being the spearhead of change means taking a calculated risk."
In BMW's case, that risk comes with a degree of political insurance – there are government incentives in many countries for the purchase of electric cars.
On top of its existing grant to encourage motorists to buy electric cars, the British Government recently committed £500m to supporting the development and uptake of ultra low carbon vehicles.
If the i3 pays off, an even bigger gamble awaits.
The next model in BMW's i-series is the i8, a hybrid which the carmaker promises will deliver the performance of a sports vehicle on the fuel economy of a small car.gher on environmental regulation, demand for electric cars will increase.