electric CHALLENGE

Taking on Tesla: BMW’s mission to Mars

The 67th IAA Frankfurt Automobile Show Opening Day
Guess the word at the back. Source: Bloomberg

They’re calling it BMW’s “Mission to Mars.” In the coming years, the Bavarian carmaker wants to turn itself into a high-tech company comparable to Apple or Google, develop dozens of new all-electric and self-driving cars, and massively boost its R&D spending. The aim is to develop a mass-market “Tesla killer,” which will win back market share from the American upstart.

All at the same time as it sells more cars than ever before, and while catching up with arch-rival Daimler, maker of Mercedes.

There’s certainly no shortage of vision at BMW’s Munich headquarters. Whether the company has the money to pay for it all is another question. What’s the priority? Everything’s the priority. BMW is on a massive hiring spree, signing up electrical engineers, software engineers and artificial-intelligence specialists. On Friday, construction began on the company’s new battery center, next door to its huge new electric-car campus on the outskirts of Munich.

Nicolas Peter, BMW’s CFO, has already found an extra €700 million ($835 million) for research and development this year, with hundreds of million more to be added in the final quarter. Next year the company expects to shell out €7 billion on R&D, Mr. Peter told Handelsblatt this weekend. That’s almost €2 billion more than originally planned, and these levels will be maintained in 2019. But Mr. Peter wants to finance all this from revenues, and that means keeping margins on car production above 8 percent. In 2016, that figure was 9 percent, but it already fell to 8.3 percent in the third quarter of this year.

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