New York 2012: A Conversation With BMW’s Big Thinker

Dr. Ian Robertson — Member of the Board of Management, BMW AG — is the man grappling with the Big Issues that will face BMW as an automaker in the near and distant future. He’s concerned with immediate matters for BMW AG, of course, such as sales. [He thinks that total U.S. market sales might exceed the current estimates of 13.5 or 13.7 million units in calendar 2012.] He also clearly spends a lot of time peering into his crystal ball and trying to maneuver BMW AG to be in the best possible position in terms of products and profits in our uncertain world.
The big news for BMW at the New York show is, of course, the introduction of its X1 small crossover SUV. Robertson reminds us that the X5 entered this segment for BMW only ten short years ago and has, as we know, done extraordinarily well both in sales and in its position in the SUV hierarchy. He expects no less from the X1, which took so long to reach America simply due to a lack of production capacity. BMW recently opened a second plant in China to meet huge demand for the X1 there, which freed up enough capacity at its plant in Leipzig, Germany, to build the X1 for us. It goes on sale this fall starting at $31,545.
On the subject of China, Robertson tells us that BMW is going gangbusters there. “We’re opening a new dealership every single week in China,” he says, with some wonderment. “This requires a huge investment in real estate and buildings, but more important, in people. The dealer infrastructure doesn’t exist in China. They haven’t got decades of car industry experience. We are expanding as rapidly as may be possible. Also, we’re seeing customers who’ve never had a luxury vehicle before.”
Re fuel prices, Robertson expresses absolute wonderment at American politicians who promise $2.50-a-gallon gasoline. “In Europe, we’re looking at 11, 12 dollars a gallon nowadays….Whatever happens in the [short-term] future, the cost of finding, extracting, or converting carbon fuels has to go up over the long term.”
Robertson expands on the oil issue. “You look at situations like the Gulf of Mexico last year. When I was in university, it was all about the North Sea, where they were drilling 200 or 300 meters. That was considered the maximum. Drilling in the Gulf of Mexico is much deeper. East coast of Brazil? 5000 meters. The easy extraction of oil is over. Most of it will be in the parts of the world that are more difficult, more challenging. That, for us, is one of the things that will inevitably drive the desire and the need for more fuel efficiency.”
“As a company, we invested quite heavily in proving that hydrogen works, but it’s really difficult and expensive to make and handle. Hydrogen as a fuel to inject into an internal combustion engine is probably not [viable] for the next 25 years. Fuel cells might come a little sooner. The electricity solution is a little easier for us to understand and comprehend. In most of the world, you have the availability of an electricity point, wheter it’s on a street corner, in your garage, and so on. Plug-in hybrids are probably set for quite an expansive part of the business.
“But there’s no silver bullet, and we should never rule out what happens with the existing internal-combustion engine. What we’ve got out there with four-cylinder engines like our new N20 would have been unimaginable two generations ago. We will continue to see innovation there to drive the power curve and CO2 in opposite directions.
“The carbon fiber i3 and i8 are 18 months away from production, and we will use carbon fiber on a wider scale, as opposed to traditional carbon fiber technology, which is low volume. I think there are 30,000 tons of carbon fiber manufactured every year, used in everything from F1 suspensions to fishing rods. The techniques that are used there are very different from higher-volume car body manufacturing. This is why we started a joint venture company [with a concern in Moses Lake, Washington]: for the knowledge and the experience we are gaining. Moses Lake produces the fiber, and then we ship it to two of our factories in Germany, where we turn it into body structures.”
Regarding repair costs of carbon fiber cars: “In the same way as when aluminium started to be used in scale, over time, the techniques develop. I’ve had a go at welding aluminium and it’s really, really difficult. We will start in exactly the same way with carbon fiber; there will be limited centers of competence with the tools and expertise. But if the structure of the car is carbon fiber, it’s very strong, so damage to the structure should be minimized.”
Our roundtable conversation turned to the cost of electricity. “Most of the cost of gasoline in the rest of the world is tax,” Robertson points out. “This is huge revenue for governments. If the industry sees more movement toward electric, how long before the government says, ‘we’ve got a revenue hole?’ The technology to charge you more for electrical power for your car than for your home use can easily be done.”
Speaking of governments, is BMW counting on government rebates to help sell its i3 and i8? we ask. “I do think governments will continue to motivate the early buyers,” Robertson replies. “But it isn’t always just with money. In Amsterdam, they allow electric vehicle owners to park in certain favorable places. How long these motivations last, we don’t know, but we’re not counting on them for long.”
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