The new BMW iX3 “Neue Klasse” SUV electric vehicle has to be on the money because it carries a huge responsibility, not only for the future of its own iconic brand, but as a lead dog for the survival of the European premium sector, under mortal threat from the Chinese. Early reports are favorable.
This Middle Kingdom challenge was underlined by global consultancy AlixPartners Thursday when it forecast Chinese market share in Europe will reach 16% by 2030, up from about 10% currently. The European auto market is currently stagnating at around 12 million a year, almost 4 million less than pre-Covid. Not much growth is expected by 2030.
So the arithmetic looks deadly for European auto manufacturers. The Chinese will account for 16% by 2030 and all of this will come from the current European, Japanese and Korean participants. That explains the current bad news of share prices crashing and huge job losses at the likes of Volkswagen and its mass-market and premium subsidiaries Audi and Porsche. On Friday, Reuters reported Volkswagen aims to cut up to 100,000 jobs worldwide over the next few years and perhaps close four factories in Germany.
Meanwhile the iX3 sales effort is accelerating, and BMW isn’t sparing the hyperbole.
“The Neue Klasse is our biggest future-focused project and marks a huge leap forward in terms of technologies, driving experience and design,” said Oliver Zipse, former CEO of BMW earlier this year. Zipse retired and was replace by Milan Nedeljković in May.
“Practically everything about it is new, yet it is also more BMW than ever. Our whole product range will benefit from the innovations brought by the Neue Klasse – whichever drive system technology is employed. What started as a bold vision has now become reality: the BMW iX3 is the first Neue Klasse model to go into series production. We are not only bringing the next generation of one of our most successful fully electric vehicles onto the road, we are launching a new era for BMW,” Zipse said.
Neue Klasse underpins over 40 new models
BMW’s Neue Klasse is a multi-billion-euro technological overhaul designed to reshape the entire vehicle portfolio. Focused on electrification and digitalization, the program underpins over 40 upcoming models, starting with the electric iX3 SUV and i3 sedan.
Investment researcher Bernstein likes what it sees.
“Neue Klasse represents the largest leap BMW has ever taken in investment and technology, and we believe it will be transformational in positioning the group at the forefront of the industry,” Bernstein said in a report.
First media impressions of the iX3 suggest the claim for 500 miles of range are unlikely to be met, although not meeting official battery range claims is par for the course for EVs. The iX3’s high-speed autoroute performance, with range losses of around 1/3, is similar to most European competitors. This is an area of weakness for Chinese competitors, where high-speed losses can range from 50 to 60%.
The scale of the upcoming threat from the Chinese looks formidable in theory. For the iX3, the European, Japanese and Korea competitive lineup looks familiar with the Audi A6 e-tron quattro, Mercedes GLC, Polestar 3, Porsche Macan, (made in Germany usually) Tesla Model Y, Hyundai’s Genesis GV60, Volvo EX60, and Lexus. But the Chinese threat now includes the XPeng G9, Zeekr 7X, NIO EL8, and BYD Tang. These names won’t be familiar to many Europeans, yet.
Peter Richardson, Research Director at Hong Kong-based Counterpoint Technology, said BMW is one of the more credible legacy EV players in Europe with its electrified vehicles now accounting for 40% of its European sales.
Heart of Joy
Richardson said in an email exchange, Neue Klasse vehicle’s Gen6 “edrive” provides improved efficiency, 800 volt electrical architecture to support faster charging, and cylindrical cells providing improved packaging as well as using the battery pack as a structural component.
“The Heart of Joy control unit, jointly made with Qualcomm, claims to provide superior driving dynamics and stability system for more precise handling and advanced autonomy via Level 2+ semi-automated systems,” Richardson said.
BMW describes its in-house developed central “super-brain” computer debuting in the iX3 as the Heart of Joy. The system replaces fragmented control units by uniting the drivetrain, braking, energy recuperation, and stability systems.
He said BMW’s brand power remains undiminished in Europe.
“However, in China, it has lost market share to Chinese competition that moves faster and prices lower, and has seen BMW’s margins and profitability fall, putting a pressure on its overall business,” Richardson said.
In Europe, BMW remains ahead of the Chinese competition, which often positions itself as premium, with long-range claims and fast-charging, and it prices aggressively. But this will come under threat.
Heart of Joy
“The way BMW is staying ahead is to leverage its brand equity and provide a high-quality cabin, with renowned ride-handling balance which can help with superior residual values. However, the Chinese are quick to learn and have fast iterative cycles – they are constantly working to close any gaps and perceived deficiencies in their products, so any lead BMW has now may not last long,” Richardson said.
Felipe Munoz, an industry expert who runs the research platform Car Industry Analysis, said BMW’s Neue Klasse models are the equal of any of the global competition.
“This is why I think BMW is one of the best positioned, non-Chinese carmakers in the EV world right now,” Munoz said in an email exchange.
Munoz said the Chinese have an advantage because of their speed to market. And however strong the European threat becomes, China is certain to play a big part, he said.
Benjamin Kibies, Senior Automotive Analyst at Germany’s Dataforce, said the Chinese have an advantage in battery technology and IT, while the Europeans will prosper although they will need to split their resources between ICE and EV development in the next five years.
“From the perspective of European customers, I think that Europeans are still ahead in terms of overall handling and ease-of-use when it comes to European tastes. Systems are more mature and have fewer issues, and Europeans prefer to have some physical buttons. Combined with brand image, this should give BMW and its peers a lifeline for the next years,” Kibies said.
Fragile and vulnerable to attack
Counterpoint Technology’s Richardson said European manufacturers face a great upheaval over the next 10 years as they grapple with new technology, autonomy, and software requirements. There will be more cooperation as well as competition between Chinese and Europeans, while the European Union’s role could be crucial.
“The competitive moat that European/western (manufacturers) have of strong brand equity, distribution breadth and established customer relationships exists, but it is fragile and vulnerable to attack. What the E.U. does from a governance perspective can potentially assist western car makers but can also hinder them,” Richardson said.
