A mass-market transition to electric vehicles, with the electricity used to charge them preferably coming from renewable sources, will represent a significant step towards cleaner air in our towns and cities. And take a big chunk out of global levels of harmful emissions.
And one of the most important elements to that leap being made is the cost of electric vehicles falling for both manufacturers and buyers. In that context, BMW’s recent statement that the German car manufacturer predicts it will be able to achieve the same profit margin on electric vehicles as it does on today’s combustion engine is good news.
Nicolas Peter, the company’s chief financial officer recently said that it is difficult to make accurate predictions, because sales volumes, which rely on adoption levels of electric vehicles up to 2025, will have a big say in manufacturing costs. But the company is quietly confident that profit margin break-even can be achieved by that date and possibly even sooner.
BMW is one of the leaders in the auto manufacturing industry’s move towards electric vehicles. It plans to launch 25 electric and hybrid models by 2023, with at least half of those battery-only. The company has also forecast sales of electric vehicles growing at a rate of 30% per annum between now and 2025.
The transition towards electric vehicles is, however, proving to be a financial burden on car makers. The cost of the R&D needed for them to be able to produce efficient and attractive models is huge. The cost of manufacturing the vehicles is also much higher than it is for petrol engine cars, at least for now. That has seen a spate of partnership announcements from automakers as many join forces to split the costs.
They also know they can’t avoid the investment with governments hoping to ban the manufacture and sale of diesel and petrol engine vehicles in the medium term. Carmakers that miss the targets of a fleet-wide average of 95g of CO2 per km will face fines that could run into billions of euros.
Other car makers have predicted that the sales price of electric vehicles will reach parity with those of combustion engine models by 2025. But BMW is the first to predict that profit margins also could.