October 1, 2012
With a $200-million investment and an entirely new business model, BMW makes its first serious foray into the future of urban mobility.
Can cars and cities coexist? Can mobile technology link automobiles to public transportation, parking facilities, and vehicle-sharing arrangements, creating seamless connections among them? Late next year BMW, the creator of the “Ultimate Driving Machine,” will attempt to answer some of these questions with the 2014 BMW i3, its first fully electric vehicle aimed at city driving. An ambitious experiment, with hefty up-front costs estimated to be as high as $200 million, the roll-out has the potential to both shift the company’s business model—from selling a product to selling the experience that product provides—and redefine the car’s role in an increasingly connected urban world.
The origin story for the i-Series—BMW’s Apple-inflected name for what it hopes will be a full line of electric vehicles—begins in Munich, Germany, with Dr. Norbert Reithofer, the company’s chairman and CEO. Five years ago he saw a potential threat looming. The world was rapidly urbanizing, which meant that most of his customers would soon be living in densely populated, congested cities. What would that mean for the vaunted BMW driving experience? “Historically, we were strong on what I call ‘autobahn mobility’—getting from point A to point B very fast on straight, open roads,” says Tony Douglas, a marketing executive for the company’s mobility services division. “As more and more people move into dense environments, horsepower isn’t necessarily the best way to get from A to B. And if our customers are living in these cities and the ultimate driving machine is sitting in traffic, that could endanger our core business.”
Not only were “straight, open roads” likely to become a thing of the past, but the internal combustion engine—perhaps the 20th century’s most disruptive technology of all—was now seen by many as an impediment to progress rather than a symbol of it. Faced with this double bind, Reithofer assembled a team comprised of engineers, designers, and sales and marketing specialists. “It was a kind of skunkworks project,” Douglas says. “No one really knew what we were doing.” The “Project i” initiative, as it came to be called, was driven by two themes: alternative powertrains (virtually every car company is working on either advanced hybrids or electric vehicles) and the issue of urban mobility—the idea of the car as one component in a larger, interconnected transportation system.
Electric vehicles (EVs) are not a new idea. The technology has been around for decades, but there were long-standing obstacles to their wider adoption: price, which still remains an issue; the limited range and power of batteries; and the lack of infrastructure required for charging. (Not to mention the oil industry’s loud and public antipathy to them.) Battery technology has improved somewhat—the range is about a hundred miles per charge (more than enough for urban driving, but something of a psychological barrier for the mainstream market). “You need fast chargers on highways at gas stations, and they need to be strategically placed so people can go places,” says John O’Dell, a senior editor on fuel efficiency and green cars at Edmunds.com. “They found that in Japan people didn’t really drive more distance, knowing that the chargers were available, but they used their electric cars more and reported less anxiety, even though they didn’t use them often.” Last March, President Obama proposed spending more than $4 billion to, according to John Broder at the New York Times, “encourage purchases of electric and natural gas vehicles and to speed construction of charging and fueling stations.” Even with a $7,500 purchase incentive from the federal government, sales of the Chevy Volt and the Nissan Leaf, two of the most recent high-profile EVs, were sluggish. (The prospects for hybrids, which don’t require external charging, appear much brighter. Experts estimate that hybrids could account for six percent of all sales in three years, and as much as 25 percent by 2025.)
So, the i3 will step into an uncertain market for EVs (at least in the United States), but BMW has, perhaps, a larger objective in mind. Like the rest of the automotive industry, the company is in the midst of repositioning itself as, “a provider of individual mobility services,” Douglas says. Call it the triumph of the Zipcar, or even a hedged bet, but it’s safe to say that all automakers are making contingency plans for a future in which car ownership might be a smaller piece of their business. “It’s the whole idea that mobility is going to change as the world becomes more urbanized,” O’Dell says. “They’ve seen all of the studies, how fewer teenagers are getting driver’s licenses.”
All the traditional buying and leasing options will be available for the i3, but users won’t have to sign on the dotted line in order to drive it. BMW has gone all-in on the urban mobility angle, taking several pages out of the car- and bike-sharing playbooks. The system uses the emerging connection between mobile devices and BMW that already exists in a nascent form in Germany. Don Norman, the noted designer and author, does consulting work for the automaker and has seen the system in action: “In Munich, when I’m with the BMW crowd, if we’re in the city and decide to drive someplace, one of the guys will take out his cell phone and open up an app that tells him where a car is located. He reserves one that’s a block away. We walk over, he waves his BMW badge, and the car unlocks. The car is not just available to BMW people. Anyone who belongs to the subscription service can do it.”
To facilitate such effortless access to the car, the company formed a venture capital arm, BMW iVentures, which has invested in MyCityWay, a creator of smartphone apps; ParkatmyHouse, a parking sharing site; and DriveNow, a one-way car-sharing system that utilizes an app to find cars located on city streets. The company will also offer, as part of its 360° subscription package, a BMW-designed wall box power source for home charging, and a reservations app for commercial charging stations.
In another smart move to address the issue of charging—the EV’s proverbial Achilles’ heel—BMW reached out last year to the Green Parking Council and became a major sponsor of the organization. This provided them with access to a whole slew of existing facilities, some of which might logically serve as charging stations. “We knocked on their door first and then struck up a relationship,” Douglas says. “Obviously, with our views on urban mobility, they add value, but they also help open doors with city authorities and policy makers.”
The i3, as an object, is striking and futuristic. “It’s BMW saying, ‘Let’s tell the world, this is a different way to go,’” O’Dell says. The glassy high-profiled vehicle features a sleek, contoured body made of carbonfiber-reinforced plastic, which dramatically reduces its weight and increases battery efficiency. BMW is the first automaker to use carbon fiber in a mass-produced vehicle.
To make that leap, the company entered into a joint agreement with SGL to build a plant in Moses Lake, Washington. The $100-million facility is a substantial investment for what might ultimately be a niche vehicle. Still, the i-Series is likely to serve another function, even if the vehicles struggle in the marketplace. “If the electric car fails, virtually all of the work that’s gone into the development of the electric drive, the battery technology, the lightweight design, the control systems, logarithms, and software can still be incorporated into other vehicles,” O’Dell says. “None of this is wasted money.”
Regardless of how the i3 does as a product, its marketing as an experience marks an important cultural shift. It’s one thing to share a bike, but another thing entirely to share a space-age, carbon fiber-coated EV with a reported list price of $45,000. Lisa Gansky, a Bay Area tech entrepreneur, has been tracking what she calls the share-economy for a few years now. She believes that concerns about climate change and population density, coupled with universal access to mobile technologies, are fundamentally reshaping our relationship to objects. Many people, particularly younger people, want a whole lot less stuff, but they don’t necessarily want to sacrifice all the experiences associated with it. Utilizing cell phones, they don’t have to. This “everything’s rentable” attitude toward products is partly generational, partly ideological. “We’re moving away from last century’s principal business model, which was organized around ownership,” says Gansky, author of The Mesh: Why the Future of Business is Sharing. She says, “We’re trading things for experiences.” Her slogan: access trumps ownership. Gansky’s website, www.meshing.it, lists companies big (BMW, for example) and small engaged in the share-economy; the list has grown to more than 7,500 firms.
BMW has seen—if not the future—then at least a credible version of it. Our cars, buildings, trains, and cities will eventually talk to each other, perhaps in ways we can’t yet imagine. But for now, creating that all-encompassing network of seamless connection is beyond the capabilities of a single company, even BMW. “The ICT [information and communications technology] revolution is hugely world-changing,” says the industrial designer Dan Sturges, who has been working on EVs for the better part of 20 years. “We now have these smartphones, and they’ve changed the way we connect, the way we shop, the way we live, but we’re still sort of scratching the surface, because the physical world hasn’t gone through any substantial change yet. We’re just at the very start of this. We’re in the Model-T days of the smart mobility and movement revolution.”