BMW & the Transformation of the Auto Industry

BMW Group is, if nothing else, transforming the nature of the auto industry.

Consider: In one week in May, BMW  announced an additional $200-million investment in a plant in Moses Lake, Washington, essentially on the other side of the planet from Munich.  This announcement wasn’t related to a new car plant.  Rather, it was for the massive increase in the output of carbon fiber material at SGL Automotive Carbon Fibers for automotive production.  The plant is producing 3,000 tons of carbon fiber right now.  It is adding production lines that will take that figure to 6,000 tons, then 9,000 tons.

BMW is presently using the material to produce its i3 and i8 electrified vehicles, which are arguably boutique vehicles, especially the latter, given its $136,625 price tag.  (However, earlier this year Jacob Harb, who is in charge of EV Operations for BMW North America, proposed to me that with the i3, the whole concept of electric vehicles as being a viable transportation device for people who are interesting in going further than the nearby Whole Foods, may have reached the figurative tipping point.)

The goal of the expansion at Moses Lake is to have sufficient materials at a competitive price point so that the use of composites is practical for mass-production vehicles.

Yes, in the context of a General Motors or a Toyota, BMW is a comparatively low-volume producer, so “mass production” might seem to be a bit of stretch.  But BMW is not in the business of building one-offs, and it is ever-increasing the number of Ultimate Driving Machines that its people and machines are producing.  (Presumably, there becomes a point at which it has to make a decision whether it has to limit the number of cars and SUVs it produces so as to maintain a level of exclusivity.  When everybody has the “ultimate” it is no longer the peak.)

One interesting aspect of what’s happening at Moses Lake is that here is an auto company that is, in effect, producing the raw material with which to produce its automobiles, something that you pretty much have to go back to Henry Ford’s vertical integration in the days of the Rouge Plant when the Rouge Plant was, given its scope, extent and capacity, one of the industrial marvels of the world (what’s interesting is that in addition to being an operating F-150 plant, today the Rouge Plant is also an attraction that people buy tickets to witness).

Certainly, the whole issue of regulations in Europe, the U.S. and China—regulations that are aimed at enforcing emissions limits and efficiency levels—necessitate the use of alternative materials, not the classic steel construction so familiar to so many for so long.

Steel companies are elevating their game, but creating new ultrahigh strength ferrous materials.  Jaguar has been using aluminum for several years to build its cars; a week or so of F-150 production will dwarf Jag’s use.  You’ve got to know that the aluminum companies are working hard to increase their relevance to automotive.  And while plastic for body panels is pretty much a thing of things past (Saturn, we hardly knew ye), it seems that a week doesn’t go by when a plastic supplier announces a new engineering application or something else in an interior.

One could argue that changes to material tend to happen from the outside in (i.e., a steel, aluminum or plastics company produces material that meet a demand for an automotive customer), here is an automotive customer that is driving the production of the materials that will be used to produce its cars—inside out.

The same week that BMW announced the Moses Lake expansion, its DriveNow subsidiary announced that it would be making it easier for those who partake of its car-sharing program in San Francisco by offering on-street parking in several neighborhoods.  Before May is out, members of the DriveNow program will be able to locate and reserve cars, as well as find out where they will be able to park them when they are through. There will be notifications on the in-car screen as to the location of “green zones,” or approved parking areas. 

According to Richard Steinberg, CEO of DriveNow USA, “DriveNow with street parking is available in several cities across Europe, and it has been a very successful business model, so we are pleased to bring street parking to the U.S.  By expanding our offerings in San Francisco, our members will find it is more convenient than ever to find and park a DriveNow vehicle.”

Think about this: a vehicle manufacturer that is facilitating a transportation method that doesn’t involve buying or leasing a car.  Certainly, money is to be made through memberships, but it is a model that isn’t characteristic of the auto industry as we know it.

It’s often said that BMW is an engineering company.  Engineers solve problems.  Emissions and congestion are certainly problems.  And BMW is addressing them in ways that will undoubtedly have an effect far beyond the company itself.