BMW’s future growth depends on EVs, and it’s finally going all in

While other automakers are dialing back their electric vehicle plans, BMW is quietly going all in.

“The tipping point for the combustion engine was last year,” CFO Walter Mertl told journalists at a roundtable in Munich recently. The German automaker has seen sales of its fossil fuel vehicles plateau and is expecting a slow decline, he said. “Growth will come increasingly from electric vehicles.”

BMW sold a record 2.5 million vehicles last year, 15% of which were all electric. This year, the company thinks it’ll sell 500,000 EVs, or 33% more than last year.

Mertl’s statement was remarkably decisive given the company’s previously wavering commitment to EVs.

Not long ago, BMW was busy hedging its bets, creating a new vehicle architecture known as CLAR that could accommodate three different powertrains — internal combustion engine, plug-in hybrid, and full electric — on the same production line. Management wasn’t sure which direction the market was headed, so it attempted to cover its bases with one platform that it hoped would do it all.

It must not have been as easy as BMW had anticipated, because the company’s first EV built on the platform, the i4, didn’t materialize until 7 years after the first CLAR car debuted. One glance at the i4 and the compromises were obvious: The tunnel, which covers the driveshaft in the fossil fuel model, sat empty, and the space under the hood was only half full. That marked a big departure from standard practices, because automakers typically cram every nook and cranny to optimize the use of metal in the frame to save both cost and weight. The i4, for all its strengths, fell short in many areas.

For its next dedicated EV, the iX, BMW had to modify the CLAR platform so much that the company’s R&D head called it a “totally new development.” In an industry obsessed with modular and reusable platforms, that statement alone made CLAR sound like a failure.

Indeed, BMW all but said as much in September when it introduced yet another new platform, the Neue Klasse. Unlike CLAR, this one would be dedicated to EVs and the company expects the platform to boost range by up to 30% through a combination of new batteries, efficiency upgrades, weight optimizations, and refined aerodynamics.

CLAR had taught BMW a lesson, but it was an unnecessary one. The automaker had previously designed a dedicated EV platform for the i3, one that was also lightweight, efficient and modular. The batteries and motors lived in an aluminum platform that was separate from the top part of the car, which held passengers and their cargo. The bottom could have theoretically been stretched or shrunk to accommodate any number of body styles.

But the i3 was ahead of its time, and while its sales grew every year for the first five years, BMW’s management got cold feet and jettisoned its platform in favor of CLAR, which first was used for the 7-series in 2015. As recently as 2020, the company was thinking CLAR was the future.

In the last few years, though, things have changed. Plug-in hybrids, thought to be a bridge to an all-electric future, fell out of favor as research revealed that drivers didn’t plug them in frequently enough to reap the benefits. Governments around the world set end-of-life dates for new fossil fuel vehicles. And consumers started adopting EVs at a quickening pace.

Suddenly having an architecture that could host a variety of powertrains became more of a liability than an asset. It’s likely that BMW discovered through its work on the i4 and iX just how hard it was to hack an existing platform to produce an efficient and competent EV.

With the benefit of hindsight, it’s no surprise that BMW eventually announced another dedicated EV platform. What is surprising is how confident the company is in its vision for an electric future. By 2026, the company is targeting 33% of its sales to be all-electric. Mertl, the CFO, doesn’t anticipate profit margins on Neue Klasse EVs to match its fossil fuel counterparts before 2026, but CEO Oliver Zipse thinks once the company can produce enough EVs, they could be even more profitable.

BMW has been here before, proudly promising a bright electric future only to renege several years later. But with looming regulations and a more receptive market, this time really could be different.

Just imagine if the company had stuck to its guns the first time around.