Forbes: German Fuel Efficiency Regulations Force BMW, VW, Audi and Mercedes-Benz to Develop Plug-In Vehicles
Why on Earth would all the German automakers jump on the plug-in vehicle bandwagon at almost exactly the same time?
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.
“…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.”
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.
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.