A BMW chief has called out its board of directors for failing to step up with battery cell production, which he describes as the heart of the car of the future. Manfred Schoch, deputy chairman of the supervisory board at BMW, has publicly critiqued BMW’s rejection of battery cell R&D, basing his assessment on the model of innovation and vision that Tesla CEO Elon Musk has established for his automotive company.
Schoch advises a quick corporate rethinking of BMW long-range planning if the company is to remain truly competitive. “I need people here who go with us into the future,” he said. He added that his comments were directed “also — and especially — for the board.”
Schoch suggested to the German business journal Manager Magazin that BMW and the auto industry in general should pay closer attention to the Tesla model rather than indulging in petty nitpicking about the all-electric car company.
Tesla, the company that has caused an electric car revolution, has been the subject of constant criticism since its first cars hit the market. Who will buy this premium car? The market for this all-electric high-end catalog is too narrow. Tesla doesn’t have the experience to produce enough cars to be profitable. The Gigafactory isn’t a viable manufacturing entity. Tesla is a fading fad. The company can’t provide a pathway to a sustainable future unless it appeals to a mass market. Claims of Tesla profitability aren’t backed up by commonly accepted accounting practices. CEO Elon Musk is a live cannon who will bring down the company.
And, yet, the numbers are positive for Tesla sales and likely ongoing profitability. “Tesla made in the third quarter, at a good $6 billion in sales, $312 million profit. BMW came in the automotive segment at 21 billion euros to 784 million surplus,” said Schoch, who has been head of the BMW works council for 31 years and is considered one of the most important leaders of the group. “Who deserves better?”
Indeed, Tesla’s success has upended the auto industry, and battery cell technology is one of the driving factors for the Tesla master stroke. In contrast, BMW just ended a supply contract with the Chinese cell manufacturer CATL, which had wanted to build a plant in Thuringia, Germany — about 4 hours away from Munich and BMW’s headquarters.
Value Chain as Key to Electromobility
Schoch pointed to Tesla’s close relationship with its battery supplier, Panasonic, as key to company dominance. That collaboration has been essential as the demand for the lithium-ion batteries that power its vehicles grows commensurate with Tesla’s increased sales. As the world’s largest manufacturer of automotive lithium-ion battery cells and Tesla’s exclusive battery cell supplier for the Model 3, Model S, and Model X, the Tesla/ Panasonic partnership is leading others in the EV field in R&D.
Tesla’s cobalt usageFor example, when it comes to minimizing cobalt usage, Tesla has long been a proponent of nickel-cobalt-aluminium (NCA) technology developed by Panasonic, which goes against the trend of a nickel-cobalt-manganese (NCM)-focused EV industry. Furthermore, Elon Musk has acknowledged that the company will continue material development toward higher-energy, lower-to-no-cobalt chemistries.
“Tesla controls the entire value chain; they understood electromobility,” Schoch commented. Tesla inbound logistics involves the receipt and storage of raw materials to build electric vehicles, energy storage systems, and solar panels, according to the Tesla, Inc. Report at business portal Research Methodology. Tesla conducts vehicle manufacturing and assembly operations at its facilities in Fremont, California; Lathrop, California; and Tilburg, Netherlands. Tesla automotive operations comprise design, development, manufacturing, and sales of electric vehicles. High level of integration of robots into various manufacturing processes is the major source of value creation for Tesla.
Battery Cell Technology is at the Heart of Future Auto Competition
Batteries are the keys to completing a worldwide transition to a clean energy economy. Tesla’s enormous battery factory — about 5.5 million square feet — in Nevada, is called the Gigafactory or Gigafactory 1. Tesla reportedly expects the Gigafactory to introduce production cost cuts for lithium-ion electric vehicle batteries and energy storage products by some 30%, compared to pre-Gigafactory batteries. Such production savings will occur using what the company has referred to as economies of scale, innovative manufacturing, reduction of waste, and the simple optimization of locating most manufacturing process under one roof.
Schoch stated explicitly that battery cell production is the determining factor to future automotive viability. “Anyone who does not master and build this core will not be able to compete,” he analyzed.
Independence and Optimism through Battery Cell Production
Schoch praised Tesla for its optimistic approach to the future of automotive transportation. “Too much is complained and too much is declared impossible [in the auto industry],” he declared.
Referring to entrenched automotive manufacturing practices that reward maintaining a status quo approach, Schoch mused, “We are dependent.” He suggested that collaboration should be an option for BMW and Tesla CEO Elon Musk. “Our board members should, finally, deal more intensively with this gentleman.”
Tesla has shown over and over again that healthy ideation and income growth are a result of a culture of innovation. Of course, with each remarkable Tesla transformation comes a shifting risk landscape. Musk manages innovation-related risks and the outcomes required in an era of digital transformation with delicate balance. His business model for converting ideas and technologies into economic value anticipates dramatic shifts in the cleantech markets, often in response to a perceived need which only Musk can envision. He’s also able to devise a pragmatic road map to implementation.
That’s a disruptive model that many automotive manufacturers like BMW have not yet been able to adopt.
As BMW moves into the electric car marketplace, it will add several electric vehicles to its catalog. BMW-owned Mini will reportedly begin production of its first EV later this year, and BMW will expand its lineup of “i” models with the iX3 in 2020 and the i4 along with the X5-sized iNext in 2021.
Manfred Schoch serves as a Deputy Chairman of the Supervisory Board at Bayerische Motoren Werke Aktiengesellschaft and BMW US Capital, LLC. He is Deputy Chairman of the Supervisory Board and Member of the Supervisory Board of BMW Finance N.V. He functions as the Chairman of the Central Works Council and Member of the Presiding Board at BMW US Capital, LLC. He is the Chairman of the General Works Council of BMW Group.