Is Apple going to buy BMW, Mr Krueger?

Interesting, Others | August 4th, 2015 by 10
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BMW’s new CEO, Harald Krueger spoke exclusively with Frankfurter Allgemeine Zeitung about the current state of BMW affairs and what’s coming in the future. Among …

BMW’s new CEO, Harald Krueger spoke exclusively with Frankfurter Allgemeine Zeitung about the current state of BMW affairs and what’s coming in the future. Among many topics, the German outlet also talked about the relationship between BMW and Apple, and how will that play out in the future. The electric SUV topic also came up, along with the Formula 1 return rumors.

Here is the full translation of the interview.

Mr Krueger, will the car of the future come from Apple, Goggle and Co.? Is it time for German luxury manufacturers to throw in the towel?

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No, I firmly believe that German auto manufacturers will continue to play a major role – if not the key role – in shaping the individual mobility of the future. We take every new competitor seriously – but we also know what we are good at.

Building cars isn’t that difficult.

That may be true for some cars. But not every manufacturer can meet premium car customers’ high demands for comfort, safety, dynamic performance, quality, design and brand strength – and do so worldwide. Many have tried to build cars and failed.

But the big companies from Silicon Valley are not just some newcomer from Asia.

Don’t get me wrong: The only car manufacturers with a future are those who anticipate customer wishes, new technologies and social changes early. We are looking very closely at how the IT industry does things – there is a lot worth thinking about.

Related: How Harald Krueger is shaping up the future of BMW

What are you looking at, for example?
There are two things that always impress me: Their openness and innovative entrepreneurial spirit and the incredible speed with which new business ideas and technological innovations are realised and implemented.

In Silicon Valley, three months is an eternity. This shows that in an era of digitalisation, everything moves much more quickly. Changes happen faster and are more disruptive – and that is something the automotive industry has to get used to. I say that as someone who grew up with the seven-year rhythm of our industry’s model cycles. That is how long it usually takes for the next model to come onto the market. Today, customers expect to have a new software downloaded as soon as it becomes available – and not have to wait until they buy their next car. Our communication with the customer and vehicles also needs to be faster. That is what is meant by connected driving.

How quickly will this happen?

We have already made a lot of progress – but we still have a long way to go. Safety and comfort would be significantly enhanced if your car could warn you of a danger around the next corner, an approaching storm or changes to road layouts due to roadwork – and in real-time too, because other vehicles provide the very latest information on a joint data platform.

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Apple CEO Tim Cook came for a visit and you supposedly talked about cooperation: What exactly is BMW planning with Apple? Are you selling your i3 carbon body to California?

We hold regular talks with companies from the international IT industry – and the same applies to Apple. The discussions were about vehicle connectivity within our Connected Drive Services.

What if Apple, with all those billions in the bank, had the idea of buying BMW?

Then I think I would know about it. But, no, seriously: We have a shareholder structure that enables long-term, forward-looking development of the company. Our autonomy is one of our core strengths and the basis for our company’s success – it is firmly embedded in our DNA.

What characteristics does a BMW car powered by an electric motor have?

As soon as you drive an i3 or an i8, you realise that dynamic performance and electro-mobility don’t have to be a contradiction in terms. We have redefined our legendary “sheer driving pleasure”. Successful premium products share a number of characteristics – including unique product substance and quality, as well as design and a strong brand. That is what makes our cars so desirable, combined with the BMW tradition – the history of our brand. The origin of the brand is very important to our customers. I was recently amazed by a group of Chinese customers who were able tell me the whole model history of the legendary BMW 2002 all the way to the current 3 Series – they knew what they were talking about and were very enthusiastic.

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China is the most important market for your flagship BMW 7 Series. How will the Chinese stock market crash affect your company?

We always knew that the double-digit growth of recent years in the Chinese automobile market could not last forever. The market in China is normalising fast – that was foreseeable. Our strategy has always been not to become dependent on a single region, so we ensure a good balance between the three regions: the Americas, Europe and Asia. NAFTA plays an increasingly important role – which is why we are expanding our plant in the United States and planning an additional plant in Mexico.

All the same, you can’t be indifferent to developments in China.

We are following developments very closely and working with our dealers to broaden their business model: Aftersales, service and financing are becoming increasingly important alongside regular new car business. One thing we mustn’t forget: China is the world’s largest single market and still offers good opportunities for growth over the medium and long term. The relatively low-rate of car ownership, a growing middle class with high brand affinity and a good infrastructure – these conditions all affirm the market potential, even if competition is getting tougher.

You have been able to obtain terrific prices so far in China: Every 7 Series sold there earns four times as much profit as the same car sold in Germany.

The BMW brand is extremely desirable in China, and the 7 Series is particularly popular.

Every social climber with his BMW is saying: Look at me, I made it.

The phenomenon of successful business people rewarding themselves with a BMW, and signalling their success to others, is not specific to China. We see the same thing in all markets, albeit in different forms. In India, for example, the X6 is the preferred car of successful businesswomen; in the United States, the percentage of women buying the 7 Series is higher than average.

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Wait a minute: The X6 is that flashy SUV people here make fun of as a macho “tank”...

That is a bit of an exaggeration, I’d say. People may have different opinions about that car, but it has been a phenomenal success worldwide.

Here, on the other hand, young people are increasingly doing without their own car; they find their status symbols elsewhere.

I know from my own kids how important their smartphone and internet are to them, but that doesn’t mean cars have lost their fascination for young people – although it is true that, for a limited period of their lives, young people attach less importance to owning a car.

Is this clientele lost for ever?

Not at all. Our industry is shifting from manufacturing cars to providing mobility – and we are showing the way with car-sharing with “DriveNow”. Young people rent out a Mini, a 1 Series, an i3 – then, at some point, they buy one of our group’s premium brands.

That’s what you hope.

It’s a hope confirmed by our market research. In discussions about the lack of interest in cars, people forget that the idea of temporary periods without car ownership is something of a central European phenomenon. Take a look at Asia, and North and South America, where people continue to strive for car ownership and work hard to be able to own their own car one day. That may partly be due to lack of public transport. But the main driving factor is the fascination of the car as a tool for achieving individual mobility and freedom.

Can you explain to us why people in countries with speed limits buy a high-performance BMW, when they are never allowed to put it through its paces?

The pleasure of driving our cars is not just confined to driving at top speed. Strong brands such as BMW, Mini and Rolls-Royce have much more to offer than raw power. You get a feel for a BMW’s outstanding dynamic performance in many different driving situations – when you start the car, or accelerating or driving round corners.

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But will you stay out of Formula One – or will you reverse the decision made under your predecessor, Dr. Reithofer?

No, Formula One no longer fits our BMW Group strategic alignment. EfficientDynamics and sustainable mobility can be transported better through other formats. Our withdrawal from Formula One was, and still is, the right decision.

When will you be bringing out the first SUV with an electric motor? Tesla is introducing one in the autumn; once again, the Germans are playing catch-up in the environmental field.

Not at all! What about the X5, which will be available from the autumn as an ultra-economical hybrid? In the city, it runs on battery, with a conventional combustion engine for longer distances, using an extremely sophisticated technology.

Why is electro-mobility making such slow progress in Germany? Nobody believes in the goal of one million electric cars on the roads by 2020.

That goal is still valid.

But no one is buying electric cars. Why is that?

“No one” certainly doesn’t apply to our BMW i cars. In the first half of this year, we sold more than 12,500 BMW i cars worldwide – about one out of every ten in Germany. There are a number of reasons why electric-car business is not so dynamic currently – one of them is that the network of charging stations is not yet as dense as we would like it to be. But we only have a limited influence on that.

But it is your responsibility to build cars with a bigger range.

We are working on it. Range is an argument – even though 150 kilometres is enough for most people to commute to work and back. Many people are worried about being stranded – and that makes customers nervous: They test-drive the i3, they love it – but then some of them still order a BMW 1 Series. Driving an electric car has not yet become a learned and practiced behaviour. Change processes take time.

And because of that, proud companies like BMW and Daimler that earn billions in profit, are calling for government incentives, paid for from taxpayers’ money?

We are not lining up for subsidies. We are only emphasising how important it is that Germany be a lead market for electro-mobility. Technology developed here should also be used here. Otherwise, it becomes difficult to sell that technology in the rest of the world. The figures show that the percentage of electric cars sold is higher in countries with government incentives.

When you talk about incentives, what do you mean, if not subsidies?

There are lots of possibilities, from separate lanes to avoid traffic to easier write-offs for company cars to free parking spaces.

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You have invested billions in electric cars and, last year, you sold just 16,000 i3s – isn’t that a flop?

On the contrary: The i3 is a huge step forward for us. We were faster and bolder on electro-mobility than anyone else – that is true. Of course, the decision to build the i3 and the i8 was not without its critics inside the company. But it is paying off, and we are learning lessons for other models. Without the i project, we would not know how to handle carbon fibre. And that is how we managed to make the new 7 Series 130 kilos lighter – and the lightest luxury sedan in its segment.

Are you planning additional i models?

There’s still room for more numbers between i3 and i8, but I can’t say any more at the moment.

Can you be sure that the electric motor will even prevail as the next technology? Over fuel cells or hydrogen?

An electric motor can be powered by a fuel cell or a battery. We don’t know yet what will win through over the long term. As manufacturers, we have to take a multi-pronged approach and follow several different paths. That is also one of the reasons why market entry is so costly for newcomers.

You arch-rival, Daimler, is currently setting one new record after another: How many S Class drivers do you aim to win over with the 7 Series?

There is an overlap, of course, between potential buyers. We naturally want the new 7 Series to win new customers: the more, the better.

And how’s that going?

Based on the feedback I have received so far, from customers and the media, I am optimistic. But let’s wait until after the market launch on 24 October.

The interview was conducted by Georg Meck and Holger Steltzner.

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