BMW has learned from its mistakes with the i3 model
For a long time, BMW was considered an outsider among automakers in the transition to electromobility, due to its concept of „technological openness“. The Munich-based company’s strategy is based on producing battery-powered vehicles on the same assembly line as conventional combustion engine cars. When Mercedes-Benz and the Volkswagen Group failed with their opposing concepts of separate EV production lines, they pivoted to BMW's more cost-effective and flexible approach. In Stuttgart and Wolfsburg, they were slow to learn from their mistakes, and the financial consequences are now leading to cutbacks.
The transition to electromobility has exposed weaknesses in German engineering. In the competition for tomorrow’s market share – especially against emerging Chinese automakers – German manufacturers initially focused on expanding their product range rather than concentrating on core variants. This approach is far more cost-effective than a full-range strategy in the EV sector. The latter drives up upfront investments in an already costly transition to modern, climate-friendly mobility.
BMW benefits from its strategy shift
This cost risk prompted BMW to discontinue production of its i3 model three years ago. When it was introduced in 2013, the vehicle resembled more of a concept car, and fitted in with the tech-driven era. However, the i3 never fitted into BMW’s core model lineup. Sales figures were modest, and a breakthrough never materialised. Under CEO Oliver Zipse, who has led the company since 2019, BMW made a strategic shift. Instead of developing entirely new EV models, the company consistently equips its established, well-known models with electric drivetrains in a new design.
The success has proven Zipse right. BMW is now performing significantly better than Mercedes-Benz and the Volkswagen Group. The Munich-based company avoids costly additional production lines for separate EV models and limits model diversity. As a result, BMW does not need to counteract the current difficulties in the German automotive industry with drastic cutbacks. The company does not require mass layoffs to stabilise its operations.
Cutbacks
In contrast, the Volkswagen Group is making headlines for the wrong reasons. VW is cutting 35,000 jobs, Audi up to 7,500, and struggling sports car manufacturer Porsche is initially eliminating 1,900 positions, with the possibility of further reductions. Mercedes-Benz, which also has a major cost-cutting program in place, has yet to specify the extent of potential job cuts.
VW CEO Oliver Blume, who has also led Porsche since 2015, is now addressing mistakes made under his predecessor. Herbert Diess, who was ousted in the summer of 2022, relied too heavily on a strategy of introducing separate EV models to drive the transition to sustainable mobility. The multi-brand corporation failed to successfully adapt bestsellers like the VW Golf. Diess became entangled in questionable and overpriced model concepts. Now, employees are paying the price for these strategic missteps.
Tesla’s crisis a lucky break
Mercedes-Benz made the same costly mistake under CEO Ola Källenius. Due to weak demand, both companies have now been forced to reverse course. Today, BMW serves as the industry’s new benchmark.
Previously, Tesla could have served as a role model for VW and Mercedes-Benz. CEO Elon Musk successfully used a limited lineup of EV models to achieve economies of scale and bring the company into profitability. But the eccentric entrepreneur is now jeopardizing his own brand. His radical political stance as a reformer under US President Donald Trump is alienating many customers. In difficult times, Musk’s problems present an opportunity for German competitors.
