The proof of BMW's electric car policy? My opinion on the share price of the German premium car manufacturer in comparison. #bmw
Disclaimer: This information is not investment advice. This is not an invitation to buy or sell financial products. I am only expressing my opinion here.
Hello everyone,
Today's article is about the luxury goods industry, and this time I would like to focus on BMW and, if you are interested, Daimler. I will proceed as follows so that you have the structure of my opinion directly at hand:
- What role could the environmental premium have played for the e-car market?
- What did BMW gain from this bonus?
- How do manufacturers like Citroën and Tesla perform?
- What is the BMW XM all about?
- Could the new operating result be a liberating blow?
I see the main reasons for this as being the fall in prices at most e-car manufacturers, falling inflation (which could actually have been a driver for more expensive vehicles) and the partial disillusionment among many motorists. While the inflation rate in Germany was in the range of 6.1% to 8.8% from May 2022 to May 2023, it is now around 2.5% in February 2024. To compensate for this loss of purchasing power, the German government decided in 2016 to partially subsidize alternative drive systems via an environmental bonus. This was primarily aimed at achieving the quota target for e-cars on German roads. Looking at these subsidized car types in this context, 1.43 million PURE electric cars were subsidized in the period from 2016 to 2023 according to BAFA. So-called "plug-in hybrids" amounted to approximately 0.8 million. Calculated on the basis of the total number of subsidies (see (2), (3), (4)):
- 1.43 million e-cars / 2.23 million subsidized cars = approx. 64% share of electric cars
But what is missing?
Right - because not only electric and hybrid cars have been subsidized, but also vehicles with fuel cells. The figure is so incredibly large and includes *drum roll* (cf. ibid.):
- 543 vehicles approx.
Yes, exactly. 543 vehicles with fuel cells.
Yes, and what does BMW have to do with it?
Not much. Neither with electric cars nor with fuel cells - and that's the problem. If we look at the vehicles by model and thus manufacturer affiliation instead of by drive type, there is not a single "pure" BMW among the top 10 applications for funding. Only the Mini Cooper SE as a 3-door model has been subsidized 23,994 times according to the environmental bonus. For those who do not know, the Mini brand has been part of the BMW Group since 2001 and is the only BMW vehicle in this list (see (4)).
Yes, but surely this is only due to the overly strict selection criteria as to why BMWs cannot be subsidized?
No. A very simple one: Nope. I was able to find a list of eligible vehicles as of 08.12.23 via (5). Since the premium has expired, not all models may be up to date. However, there are, for example, prominent BMW vehicles such as:
- the BMW i3 Type 8P21
and
- the BMW i3 Type 8P61
These vehicles were not considered particularly popular when they were launched on the market. In addition to an unusual body design, wheels with hardly any diameter and suitably thin tires, the i3 offered many aerodynamic and fuel-efficient features. But in my opinion, customers were offended by these smaller design elements. Of course, it may be that thinner tires help electric cars with a short range to last longer. But unfortunately, some customers wanted the wider tires. In addition to this rather unpopular i3, there were also the SUV-like iX models. In total, there were 13 possible models that could have been selected for promotion (see (9)).
What stands out?
The comparatively high price is hard to argue away. The "cheapest" BMW according to the BAFA net price list (this is rather not the price a private buyer would pay) was at a minimum of €31,932.77 and at a maximum of a proud €64,957.98. I don't want to start a discussion here as to whether these prices are justified or not. In terms of price, other manufacturers such as Citroën are around €33,000 on average. Here, too, there are higher priced vehicles, but the customer also has the choice of getting average saloons at a reasonable price. Nevertheless, the high prices here are less of a problem in my opinion, because manufacturers such as Ford also offer electric cars, especially in the higher-priced segment. In terms of feel, according to the BAFA list, 70% are more likely to be found in the €45,000 upwards segment (see (5)).
BUT
At least there is a little choice in the "lower" price segment. Unfortunately, BMW does not offer this variation according to this list. Tesla, a US company, is among the top 10 e-vehicles four times. Just 3 vehicles come from German manufacturers.
Why might that be?
You may already know the answer, as most of you on this platform will probably remember my first article on BMW in this context. At that time, I commented on BMW's openness to various drive technologies such as gasoline and diesel, but also to drives such as electric and hydrogen, and was relatively impressed by this mix from which the customer can freely choose his drive. With the environmental bonus, however, this strategy seems to have backfired on BMW. However, this effect of electrification seems to have cooled down year by year. In 2022, there were still 820,000 subsidized cars. In 2023, this figure was 376,000 electric cars. Since the cut-off date of 17.12.23, the scrapping premium was abolished and some manufacturers had to reduce prices by their own subsidy. As a result, the state no longer took on the role of promoter, but rather that of a demander. So what does BMW make of this? Nothing (see (3), (5))?
No, because in my opinion BMW, like Daimler, has completely committed itself to the concept of the luxury provider and is tending more towards hybrid and other drive technologies. An example of this is the BMW XM, which is fully electric and...
Think again.
No, the BMW XM is not fully electric but a hybrid vehicle with a combustion engine, which alone delivers 489 hp and an additional 197 hp via an electric auxiliary drive. So we are talking about a luxury-class sports vehicle in SUV form that has a total of 653 hp - but (if it still existed) would not be eligible for subsidies via the environmental bonus. Although it drives around 82 to 88 kilometers according to the WLTP standard, it would exceed the maximum price limit. I find a quote from Mr. Van Meel, the managing director of BMW M GmbH, interesting in this regard (see (8)):
"(...) further electrified vehicles will follow the XM. We are also already working on the first fully electric BMW M high-performance model"
My interpretation of this quote does not suggest that BMW would completely abandon the combustion engine. It talks about "several" vehicles that will follow the XM "electrified". From this I conclude that the vehicles in question cannot be fully electric. The distinction between electrified and fully electric in this choice of words could point this way towards hybrid technology (cf. (7), (8)).
Currently, this path does not seem to be going too badly for the BMW Group. This month, BMW reported the highest operating profit in the company's history. This money is to be used to close the discrepancy between market standing in the e-car market and the company's own self-image. Specifically, 6 new electric model series are expected by 2027. The target of 50% electric vehicles by 2030 has also been set. However, it remains unclear whether we are talking here about additionally "having an electric drive" as described above for the XM - or ultimately ONLY about "having an electric drive". The technology openness has apparently brought BMW an annual sales increase of 9% and 6% more BMWs, Minis and Rolls-Royces could be sold in 2023. The operating profit mentioned is around 18.5 billion euros at the peak of BMW's history and clearly eclipses the 14 billion euros of the previous year (see (6), (8)).
I hope you enjoyed my opinion on BMW and that it wasn't too dry for you. In future, I would like to keep my articles to a similar length and will write several parts for longer topics.
And now it's your turn: What do you think of BMW's latest figures? Like the New York Times, do you think BMW is the "surprising winner in the electronics market"?
I look forward to your opinions and ask for constructive comments 😊
Your Bass-T
Sources
(1) BMW analysis of BASS-T
(3) https://www.tagesschau.de/wirtschaft/verbraucher/elektroautos-umweltbonus-kaufpraemie-100.html
(5) https://www.bafa.de/SharedDocs/Downloads/DE/Energie/emob_liste_foerderfaehige_fahrzeuge.html
(7) https://www.bmwgroup.com/de/news/allgemein/2022/FuelCell.html
(8) https://www.bmw-m.com/de/topics/magazine-article-pool/bmw-xm-m-hybrid-system.html