Forbes: German Fuel Efficiency Regulations Force BMW, VW, Audi and Mercedes-Benz to Develop Plug-In Vehicles

4 years ago by Eric Loveday 13

BMW i3

BMW i3

Why on Earth would all the German automakers jump on the plug-in vehicle bandwagon at almost exactly the same time?

VW e-Up!

VW e-Up!

It’s for fuel efficiency compliance, says Forbes.

Here’s what Forbes writes:

“BMW, with its little i3 city car, is leading a scramble by German luxury car manufacturers to produce electric vehicles before European regulations make it much harder to sell their traditional high-margin, gas guzzling, super-fast limousines, and make money.”

“BMW, and manufacturers like Mercedes, and Volkswagen’s Audi and Porsche, are all threatened by tightening fuel efficiency rules and are being forced to invest huge sums in alternative powered vehicles. They are desperate to bring electric, hybrid and plug-in hybrids to market.”

Yes, Forbes is mostly right.

The German automakers have been reluctant to do plug-in vehicles, but soon they’ll be forced to, so why not get into the game now.

B-Class Electric Drive

B-Class Electric Drive

Forbes adds:

“…China has now joined Europe and the U.S. in designing programs to ratchet down on fuel consumption, although Germany is having second thoughts. Germany recently blocked an E.U. deal which would have forced Europe’s car makers to achieve an average fuel economy of close to 60 miles per U.S. gallon by 2020. That compares with a 2015 E.U. standard of around 43 mpg and with America’s 54.5 mpg by 2025. As well as delay, Germany also wants so-called “super-credits” so that electric and plug-in hybrids can count up to three times as much towards the average as regular cars, allowing top-of-the-range profit generating big cars to continue to be sold.”

Audi A3 Sportback e-tron

Audi A3 Sportback e-tron

Though it could be argued that the upcoming plug-ins from BMW, Mercedes-Benz and VW are not compliance vehicles, the truth is they actually are.  These German plug-ins were initially conceived so that the automakers could meet future EU requirements.  Whether or not they are sold in volume doesn’t matter.  The point is that we believe neither BMW nor Mercedes-Benz nor VW/Audi would enter the plug-in segment had it not been for tightening regulations.

Where BMW differentiates itself is in embracing the technology that it’s been dealt.  BMW knows it has to make plug-in vehicles, so the German automaker decided to go whole hog.  Why make only mediocre plug-ins to satisfy regulations?  BMW won’t do that.  Instead, BMW choose the path of if we must do so, then let’s do it right.

Volkswagen e-Golf

Volkswagen e-Golf

It remains to be seen if Mercedes-Benz or VW/Audi will ever show the same level of commitment that BMW does (our guess is VW/Audi probably won’t).  Additionally, BMW’s huge commitment to plug-ins carries with it the risk that if these vehicles fail, then BMW will lose billions.  Whereas Mercedes-Benz stands to lose very little right now if their plug-ins aren’t successful.  VW/Audi sort of sits in between BMW and Mercedes-Benz in terms of commitment, money spent and risk of loss for plug-ins.

As Forbes says in regards to the BMW i3:

“All this comes at a price, with some analysts saying the i3 will lose BMW up to $270 million a year for five years.”

“BMW, which has reportedly spent about $2 billion on the project, says it will make money from day one.”

Oh, but BMW is claimed to have a 4 to 5 year advantage on its fellow German automakers when it comes to plug-in vehicle development, so there’s that side benefit if the i3 and i8 prove successful.

What we see again though is that few automakers willingly develop plug-in vehicles.  Only Tesla, Renault-Nissan, Mitsubishi and perhaps a couple of others show that, regardless of regulations or requirements, plug-ins have long been and will forever remain part of their future game plans.

Source: Forbes

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13 responses to "Forbes: German Fuel Efficiency Regulations Force BMW, VW, Audi and Mercedes-Benz to Develop Plug-In Vehicles"

  1. Anon says:

    Finally!!! Talk about foot dragging…

    1. Robert says:

      Anon +1

  2. Francis L says:

    “VW/Audi sort of sits in between BMW and Mercedes-Benz in terms of commitment, money spent and risk of loss for plug-ins.”

    No, there is still a big risk : when EV sells starts to liftoff, VW and Audi won’t have any good cars to offer compare to BMW’s models. So customers will switch to BMW, and VW/Audi and others might loose much more money. I was, for instead, a big Toyota fan. But my next vehicle will be a EV, forcing me to go somewhere else than the Toyota dealership.

    Being the leader today doesn’t mean they will be tomorrow. Who still have a Kodak camera?

  3. George B says:

    Good and timely article, Eric. I don’t see things the same way you do however. If all of these manufacturers were building plugin cars for compliance reasons, we would see a lot of factory conversions and hybridized gassers. The smart ED and the i3 don’t fit this bill, and neither does the i8, due to its new platform. There really was not much reason for Daimler to pursue the smart ED when they did, and they were not forced to invest into Tesla and partner with them either. Toyota is famously hostile towards EVs, and their RAV4 by contrast was and always will be a prime example of a compliance car. This also highlights why the smart ED isn’t. I would put the i3 on the same level with the LEAF, except that the manufacturer is a bit later to the game. One could argue that they have at least recognized the importance of this technology and have contributed their own set of innovation to it. This does not look like a car, which is built for fleet fuel efficiency compliance. That could have been achieved for a lot less money. I think the size of the commitment and the depth of the program signal true conviction on the part of the manufacturer.

    1. Jay Cole says:

      Its nice just to get away from the Tesla fire article and get back to normal isn’t it George? I know I’m glad to not be pulling 300+ comments out of a thread for spam, lol.

      1. George B says:

        I couldn’t agree more, Jay! Every time I opened that article to get an update, there was a boatload of new comments. Very unusual. Personally, I’m waiting to start receiving spam emails asking me to deposit $5,000 via Western Union to claim the Model S I have just won in a lottery 😉

    2. Brian says:

      “I would put the i3 on the same level with the LEAF, except that the manufacturer is a bit later to the game. ”

      Technically, BMW was in the game before Nissan, with the mini-E and then the Active-E. The difference is that BMW took their sweet time making sure they “do it right” as Eric put it. Nissan jumped in with both feet, but they made several mistakes in their first pass (resistance heater, off-the-shelf 3.3kW charger shoved in the trunk, no thermal conditioning on the batteries to name a few). They have corrected some, but not all of these mistakes. I’m sure in time they will get better. BMW has a “premium” image to uphold, so they really want to get it right the first time.

      1. George B says:

        Brian, point taken, but based on what I know, BMW is a few years behind Nissan. They commissioned to the MINI-E to AC Propulsion in 2008. Nissan already had their own drivetrain and batteries fitted in Versa and Cube mules at that time. These vehicles would be roughly comparable to the ActiveE, which BMW brought out in 2011. I think Nissan already had a decent plugin vehicle in the form of the Altra in 1999. They kept refining it, and decided to pull the trigger on the LEAF program in 2006. Reportedly, this decision did not come for BMW until late 2008 and early 2009. You might want to read this article about the roots of the i3 program. It’s in German, unfortunately, but Google Translate usually works well with this type of content.

        http://bit.ly/kampfumdeni3

        “Wir dachten, wir würden gleich eine Schleichmühle fahren.” BMW-Lenker Norbert Reithofer (57) erwartete einen wenig aufregenden Morgen. Der Kalender zeigte den Oktober 2008; im Münchener BMW-Werk stand ein Mini für den Konzernchef zur Probefahrt bereit.

        Genauer gesagt: ein Elektromobil, Kofferraum und Rückbank vollgepackt mit Batterien und Elektronik. Ein Versuchs- und Vernunftfahrzeug.
        Doch von Langeweile keine Spur. “Wie im Gokart” kurvte Reithofer um die Pylonen. Von da an war ihm klar: BMW Chart zeigen und Elektromobilität, Fahrvergnügen aus der Steckdose: Das könnte funktionieren.

        Die Probefahrt im Mini E war für Norbert Reithofer der erste Test seiner Zukunftsstrategie. Die BMW-Führung wollte eine Revolution auf vier Rädern, ein Stadtauto – “kompromisslos fast bis zum Schwachsinnigen”, wie ein Rivale halb kopfschüttelnd, halb bewundernd bemerkt.

        1. Brian says:

          Interesting. So BMW didn’t really haven’t anything in motion behind the scenes? All of their development/test mules were done in plain sight? Well that’s certainly a different tactic than Nissan’s “surprise! We have an EV!” method.

          One of these days I need to learn some German. My Bavarian grandparents would be proud…

  4. Brian says:

    I disagree with the premise that Nissan isn’t building the Leaf for compliance. In “Revenge of the Electric Car”, Goshn was asked whether he believed in climate change. His response? It doesn’t matter whether he believes in it, enough people do that he will be forced into electric cars eventually – why not beat them to the punch?

    1. George B says:

      Good point! I think Ghosn and the senior leadership at Nissan deserve a lot of credit for green-lighting the LEAF program and for pushing it through. Although it’s difficult to second-guess, I think it’s strategic for the company, because they saw the inevitability of this development along with an opportunity to jumpstart the competition.

    2. Taser54 says:

      Great answer by Goshn. Today was cooler than yesterday- must be climate change.

  5. Mark says:

    Focusing on DAG; I think the article lacks a bit of research if I am honest or, a global perspective perhaps. In 2006 there was 100 smart ed phase one vehicles on trial in the UK. At the same time there was the A Class e-cell (169), and the B Class (245) e-cell and F-cell available to lease in certain countries (inc. CA/USA), then came Vito e-Cell. Smart phase two arrived 2009 (an evolution of phase two), and then phase three in 2013. I think definitely (and this is a personal opinion) all ICE vehicles will need to be hybridised to meet future forthcoming regulations but, I would say that all current plug-in EV technology that is being designed and tested at the minute, is potentially in preparation for the ultimate goal of the domination of fuel cell technology in the very near future. Perhaps some manufacturers who are close to producing a mass-produced Fuel-cell vehicle see the plug-in EV’s as merely a means to an end.