In an effort to combat increasing competition from Chinese automakers and close the gap with the prominent American company Tesla, BMW and Mercedes are embarking on their most significant venture into the electric vehicle (EV) market to date.
During the recent IAA Mobility motor show held in Munich, Germany, both automotive giants unveiled electric concept cars and new platforms designed for their forthcoming battery-powered vehicles.
European automakers, often perceived as lagging behind Chinese firms like Warren Buffett-backed BYD and Elon Musk's Tesla, have had to accelerate their efforts to demonstrate their readiness to play a substantial role in the electric vehicle era.
On Sunday, Mercedes-Benz introduced its Concept CLA Class, an electric vehicle based on a novel architecture that will serve as the foundation for future battery-powered automobiles from the German automaker. The company disclosed that this concept car boasts an impressive range of 750 kilometers (466 miles) and has the capability to achieve a 400-kilometer range with just 15 minutes of charging.
Mercedes CEO Ola Kallenius enthusiastically praised the vehicle, hailing it as a "groundbreaking advancement" for the German automaker.
Kallenius expressed his confidence, stating, "Given these impressive efficiency figures, remarkable range, and rapid charging capability, I am not aware of any vehicle in its category that can rival these attributes," during an interview with CNBC's Annette Weisbach on Sunday.
On the previous day, BMW, Mercedes' rival, showcased the "Vision Neue Klasse," another electric concept car designed to showcase the company's ambitious foray into electric vehicles. The Neue Klasse represents BMW's new platform for its electric vehicles, with the initial models based on this platform slated for production in 2025.
BMW CEO Oliver Zipse emphasized the significance of this development, stating, "In just two years' time, these cars will be on the roads, ushering in a new era of innovation and sustainability for BMW. This is the essence of our presentation here at the IAA," during an interview with CNBC's Arabile Gumede.
Zipse revealed that BMW is set to double its electric vehicle (EV) sales within the current year. He also projected that by the conclusion of 2023, battery EVs will constitute 15% of BMW's global sales.
Both Mercedes and BMW are embarking on a significant departure from their previous approaches, where they would modify combustion engine or hybrid models and integrate batteries. This marks their most substantial effort thus far towards adopting entirely new platforms tailored for the electric vehicle era.
While analysts acknowledge that Mercedes and BMW's announcements represent significant strides, they also suggest that these automakers may still trail behind Tesla.
Daniel Roeska, a senior research analyst at Bernstein Research, commented via email, stating, "The new platforms at Mercedes and BMW reveal, for the first time, the capabilities of European original equipment manufacturers (OEMs). While these cars may still be about a year away, their specifications indicate that European OEMs will be capable of delivering compelling products."
Roeska further indicated that these new platforms "will narrow a substantial portion of the gap" between European manufacturers and Tesla, as well as Chinese competitors, though it may not eliminate it entirely.
Focus on the Price Battle
BMW and Mercedes are delving deeper into an increasingly competitive electric vehicle market, which is predominantly dominated by Tesla and various Chinese contenders.
In the second quarter, Tesla led the global EV market with a 20% share, followed by BYD at 15%, as reported by Counterpoint Research.
The competition has intensified due to a pricing conflict primarily initiated by Tesla. The U.S. automaker initiated price reductions in 2023, committing to sacrificing short-term profit margins to gain a larger market share.
Both Mercedes and BMW operate within the premium segment of the market, directly competing with cars like Tesla's Model S and Model X. While they prepare to introduce more electric vehicles in the coming years, Mercedes maintains that its primary focus is not solely on achieving substantial sales volumes.
"We are prioritizing value over sheer volume," stated Kallenius.
Meanwhile, Volkswagen seems to be pursuing a strategy of releasing cars at various price points to cater to diverse market segments.
On Sunday, the company announced its intent to introduce eleven new all-electric models by 2027, underscoring its commitment to electric vehicles. In 2026, Volkswagen has revealed plans to launch the ID. 2all, an electric vehicle priced at less than 25,000 euros ($26,942).
During the IAA show, the German automotive giant showcased the ID. GTI Concept electric vehicle and disclosed that a production version of the car is scheduled to be on the road by 2027.
Tesla and China Lead the Way with a Focus on Technology
In a world where electric vehicle power relies on batteries, the appeal to consumers isn't solely based on car design or engine performance. Technology has become an increasingly crucial factor.
According to a recent note from Counterpoint, "Premium electric vehicles now need to emulate smartphones more than conventional automobiles to provide a comparable experience to Tesla," which is regarded as the benchmark in the electric vehicle market due to its vertically integrated platform.
Indeed, Tesla's success hinges on its control of both the hardware (the car itself) and the software integrated into it. Elon Musk frequently emphasizes Tesla's Autopilot features, enabling the vehicle to autonomously perform certain driving tasks. With its large internal screen and array of apps, Tesla's user experience feels more akin to using a smartphone.
Several Chinese automakers, including newcomers like Xpeng and Nio, are actively promoting their semi-autonomous driving capabilities.
At the IAA conference, established automakers have also been emphasizing their technological prowess, aiming to demonstrate their ability to compete with both Tesla and emerging Chinese startups.
For instance, BMW showcased its Vision Neue Klasse EV, equipped with a heads-up display that projects information onto the driver's windshield.
BMW CEO Zipse emphasized that the Vision Neue Klasse represents the "most substantial investment" in a car's digital components, including semiconductors.
"This imparts a wholly digital experience to the vehicle," Zipse remarked.
