Why BMW and Daimler should extend EV ties

Two of the biggest obstacles to electric vehicles are the high price and constrained product offering -- a problem Volkswagen Group is tackling by maximizing volumes on its electric vehicle architecture, even if that means opening up their technology to rivals. All that matters is scale and who will be the first to reach it, said VW Group CEO Herbert Diess, who aims to sell 22m full-electric vehicles by the end of 2028. Only with scale can you gain access to next-generation cell chemistry, Diess argues.

Unsure of EV uptake in the next decade, BMW and Daimler are separately pouring billions of euros into developing their own flexible platforms capable of accommodating any powertrain, but compromises are inevitable in the process. By developing a custom-built EV architecture, VW Group can achieve longer wheelbases, very short overhangs and offer a cabin with the interior space of a car positioned a full segment higher. VW has shown you can put a different top hat on the same EV chassis, with concepts ranging from a compact hatch through a 5-meter-long minivan to a stylistic dune buggy just with the VW brand.

So, is it time for BMW and Daimler, which have seen their margins suffer under the weight of their enormous investments, to consider joint development of an EV platform to reduce costs? This publication would argue that together BMW and Daimler could easily reach greater volumes than those foreseen for the PPE (Premium Platform Electric) architecture that will be used by VW Group rivals Audi and Porsche while also protecting their future margins.

The lower mechanical complexity means there is less potential to set oneself apart through the hardware, which is largely dominated by a costly battery with cells that are purchased in bulk from the same suppliers. Aspects such as interior and design can be wildly different despite being married to a standardized EV "skateboard."
VW brand sales chief Jürgen Stackmann argues that the digital customer experience will play an increasingly important role going forward as only about 10 percent of future innovation will come from hardware, meaning the car itself. "Competitive differentiation will additionally result from software, everything from connectivity through apps to a coherent brand ecosystem," Stackmann told Automotive News Europe.

BMW and Daimler have already partnered with VW Group to acquire Nokia's high-resolution digital mapping unit, HERE, and the automakers are also part of the Ionity fast-charging consortium. In February BMW and Daimler agreed to combine their mobility services into a new joint venture, and most recently they revealed plans to collaborate on next-generation Level 3 autonomous driving for highway applications for products that come after the iNEXT.

BMW Group finance chief Nicolas Peter, however, said there were no talks with Daimler to jointly develop an EV platform. "Much more important than scale for lowering battery costs is research and development in new, more affordable cell chemistries," he told ANE.

In areas such as platforms and standards, "co-opetition" is easier said than done, especially when parties begin weighing the trade-offs, said Markus Winkler, head of the global automotive practice at consultancy Capgemini. "When it comes to the moment of truth when you build it, the first reaction everyone thinks is: What is my own benefit? Instead of thinking: What is the win-win benefit?," he said.

Even if Mercedes and BMW were to agree tomorrow to join forces on an EV platform, time is not on their side. Product cadence alignment is key because it can take years until two new partners can achieve any savings. The earlier they start, the greater the benefits. Audi and Porsche already enjoy a two-year head start. Their first models are slated to reach the market by late 2021. They might find the path to material profitability much sooner than BMW and Daimler.