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 The emergence of rivals including ride-sharing company Uber [UBER.UL]
and technology group Alphabet which has developed its own
self-driving car, has prompted BMW to rethink its traditional
strategy of selling large powerful luxury cars.
"We are leading BMW Group into a new era," Chief Executive Harald
Krueger told journalists at BMW's annual results news conference.
"To this end we leverage innovative technologies, comprehensive
connectivity and zero-emission mobility. All of these need to be
industrialized, bearing in mind our business responsibilities, and
in a sustainable manner, which in itself is another great
challenge," he added.
BMW Group aims to achieve a pretax margin of at least 10 percent
from 2017 to 2020 by pushing digital connectivity, autonomous cars
and developing businesses including motorcycles and financial
services.
Analysts at Evercore ISI welcomed the new strategy. "BMW, in our
view, can stay in the top of automotive innovation leaders and
outgrow global vehicle demand by spending 10 to 12 percent of its
revenues in R&D and capex," Evercore said in a note.
Shares in BMW rose 4.6 percent to 83.21 euros by 1145 GMT,
outperforming a 2.1 percent rise by the STOXX Europe automobiles
index .
New technologies have created opportunities for the automotive
industry, forcing the Bavarian carmaker to evolve its business
beyond mechanical engineering towards becoming a software and
technology company.
"The value creation is shifting from the actual hardware toward
software and services," Krueger said.
BMW said it would focus on developing the businesses of
high-definition digital maps, sensor technology, cloud technology
and artificial intelligence.
BMW will also push services including providing wall mounted
electric car charging boxes and software programs to help drivers
find a parking space with its ParkNow and ChargeNow services.
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In addition, it will seek to maintain the high profitability of its
cars business by boosting the number of high-margin luxury vehicles
like the 7 series, and broadening the range of M performance branded
cars.
At the same, time, BMW is looking at streamlining its portfolio of
cars to focus on the most profitable models.
"We will take a hard look at both variants and equipment options,"
Chief Financial Officer Friedrich Eichiner said, explaining that
this helps reduce complexity in development, production and
aftersales. Mini has reduced the range of its models to five,
cutting three variants.
This new simpler production method will help achieve savings of more
than 100 million euros over the coming years, BMW said.
Krueger hinted that BMW, which has outsold Audi and Mercedes-Benz
for the past 10 years, may be prepared to surrender the volume crown
among luxury carmakers.
"I have always said that we don't only look at volumes," Krueger
said.
(Reporting by Edward Taylor; Editing by Maria Sheahan and Keith
Weir)
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