Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury vehicles, will have to increase investment in electric-car production if demand for the new i3 model continues in line with initial orders.
Customers have reserved more than 8,000 of the battery-powered i3, which will cost $41,350 in the U.S., even before the car hits showrooms in Europe next month, Chief Financial Officer Friedrich Eichiner said yesterday in Amsterdam.
BMW expects to sell more than 10,000 of the four-person car next year and “will adjust capacity according to demand,” he said at a press conference. “If demand holds, which is what it’s looking like, we will soon have to invest more.”
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 sport-utility vehicle to maintain its sales lead over Volkswagen AG (VOW)’s Audi and Daimler AG (DAI)’s Mercedes-Benz. Both competitors have vowed to surpass Munich-based BMW in deliveries by the end of the decade.
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.
Margin targets
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 deliveries to rise this year for its 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 Mexicoboth 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.
