The Transition to Electric Vehicles

 

i4 M50 BMW

The world of new product development and innovation is fascinating to me.  People and companies are dreaming up new technologies and better mousetraps all the time.  According to Inc. Magazine the late Professor Clayton Christensen at Harvard Business School claimed there are about 30,000 new products introduced a year and that about 95% of them fail.  The same article noted the 70-80% of new grocery products fail.  Part of the fascination with new product development are the companies and people that defy these odds and had a string of amazing innovation e.g. Apple under Steve Jobs and Sony under Akio Morita.

When a potentially disruptive technology come to our attention, there are no shortage of futurists and other prognosticators that make bold claims of how quickly and completely the new technology will take over and transform the marketplace.  There is a funny thing about predicting the future… it is really hard to do.  Aren’t we all supposed to be reading books only on computers, pads, or readers by now?  Isn’t typing and handwriting supposed to have given way to voice recognition applications?  We should all be wearing Google Glasses by now, shouldn’t we?  How about jetpacks, flying cars, and holographic TVs? We have been anticipating these technologies for years and probably have years to wait before we see these products… if ever.  Isn’t AI supposed to have eliminated most jobs that humans currently do?

Of course, there are examples of disruptive technologies that actually have disrupted the status quo and dramatically changed the way we live.  Think digital photos.  It happened so fast, it put Kodak out of business.  Think of Amazon.com and the e-commerce revolution.  It is amazing how quickly have they dominated sales in several markets.  The advancement of both phones and e-commerce were accelerated by the innovation of the smart phone, primarily the iPhone. 

We have been hearing about electric vehicles and self-driving vehicles for many years.  It began with hybrids and the popularity of the Prius and Chevy Volt.  It changed dramatically with Tesla launching their first car in 2008.  Tesla has essentially owned the electric car market until just about right now when the traditional auto industry and a few start-ups are finally gearing up to launching a fleet of electric vehicles in short order.

In this blog, I have been critical of Detroit.  I have slammed both Ford and GM for poor management that has resulted in loss of market share and not having the results coming out of engineering to match the best of the Asian and German automakers.  My most recent criticism of GM was just this month:  Another Negative Milestone for GM.  Yes, I was tough on them but this might have been the low-water mark of their long sixty plus year decline as they have been aggressive in moving to electric vehicles.  A year ago, they announced an ambitious $35 billion plan to phase out gasoline and diesel-powered cars and trucks by 2035.  This sounds like a serious commitment by GM and seems more serious and real under the leadership of Mary Barra than the GM leadership of yore.  Check out Our Path to an All-Electric Future.  It is part of the GM website and subject to their own hyperbole, but it lays out their approach and strategy in an easy to understand manner.  It is impressive. 

Whereas GM is all-in on electric vehicles and abandoning the internal combustion engine.  BMW is taking a different approach.  They are developing platforms for their various vehicle classes that is based on a strategy of offering four drive-train options:  gasoline, gas-electric hybrid, plug-in hybrid, and battery-electric .  They will continue to offer rear and all-wheel drive options as well.  In a WSJ article today, Dan Neil their brilliant automotive reviewer noted that BMW is planning to “accommodate an array of power and performance upgrades all without significant rejiggering of the assembly line.”  The WSJ article reviewed, quite favorably, the new i4 M50 and noted that:

From 2026 onward, Plant Munich will be able to produce up to 100% BEVs [battery electric vehicles]. The mix “will be determined entirely by demand,” said Chairman Oliver Zipse in his Q3 2021 statement. “That is how systematic transformation [to electrification] works.”

I feel compelled to favor the BMW strategy over GM’s even though I am aware that I am a 3^rd rate futurist at best.  I think that allowing actual demand to determine the mix appeals to me more.  As demand for electricity increases to recharge cars and the demand for gasoline decreases, there is some equilibrium point where the cost of both is about the same.  So, I am guessing there will be a market for internal combustion and electric vehicles just as there is a market for physical books and e-books.  (Can I even compare books and cars??)  We shall see how this plays out.

In the meantime, I have my eye on the i4 M50 or maybe the 5 or 7 series equivalent when they come out.