BMW: Lessons From California For Successful EV Introduction

In the quest to commercialise electric vehicles, incentivising customers at point of sale is far more important than formulating high level strategic industrial policies, said BMW Group’s head of steering government, external affairs and sustainability Andreas Klugescheid.

Taking example of BMW’s experience in California, which is home to over 150,000 electric and plug-in hybrid (PHEVs) vehicles, and contrasting it against the lukewarm reception towards such vehicles in Germany, Andreas concluded that EVs succeed in California because it had a the right mix of forward thinking, environmentally conscious consumers, backed up by attractive incentives – which knocks about USD10,000 off an EV’s list price.

A BMW i3 starts from USD42,400 in the US. Buyers are eligible for a USD7,500 tax credit US federal government. On top of that, i3 owners residing in California are entitled for another USD2,500 rebate. This effectively brings the price of the BMW i3 down by USD10,000!

Over the in Germany, the government placed too much emphasis in high level strategic thinking, focusing on creating complex industrial policies to spur the manufacturing of EVs, conducting in-depth research into consumer behaviours and driving habits, without actually doing much to spur the demand for EVs.

Between 2010 and 2013, Andreas was attached to the BMW Group’s representative office in California and was responsible for government affairs activities in the West Coast states in the US. There, he witnessed first-hand the stark differences in response.

“Their (California) approach was a very typical American way - ‘Show me the money, right?,’ and that was the key thing required,” said Andreas to Carlist.my during the sidelines of the E-Mobilia World 2015 conference in September.

“California has a long history with health issues, specifically Los Angeles. In the ‘60s, ‘70s and ‘80s, it was city that was really affected by the issue of smog. And that was one of the drivers, and people say we need to get rid of it,” explained Andreas.

“What makes things happen in California is a general openness towards technology. People in California are really keen to go for the latest and newest technology. The other thing was a more developed understanding of sustainability as a value – it’s a question of mindset right? California is also a very important market for car manufacturers. It’s also market where customers are able to spend their money – people in California are generally quite wealthy.

“So they go for technology, they are interested in things that make the environment better. Yes there was government support, but it was less about the mandate but more of the clear decision of the Californian government to incentivise and to put public infrastructure into place,” said Andreas.

EV and PHEV owners are also incentivised by other non-monetary means like access to car pool lanes on the highway, which is a major attraction for many commuters.

On government policies to promote EVs, Andreas said, “Mandates don’t make markets. Let’s say the government decides the country needs to have a certain number of EVs. But the customer will ask – why should I buy an EV?”

Taking the example of Germany, Andreas said the Germany gave very minimal incentives to EV buyers, but the German government targets to have 1 million electric and plug-in hybrid vehicles on the road by 2020. To date, they have only succeed to have about 40,000 on the road.

“In a typically German way, we decided – let’s do strategy. So, we set up a National Platform for Electric Mobility. Then, we formulated a goal of one million EVs on the road by 2020. And, we have to do research – understand the potentials in terms of industry policy, battery manufacturing, user behaviour, how to integrate renewable energy into the grid, etc, etc.

“What we didn’t do, was directly incentivising the customer. There is a vehicle tax break for EVs, but given that German car taxes are relatively low, this is not really important for the German EV buyer,” lamented Andreas.

“So in California, you have a population of around 36 million but it has over 150,000 electric and plug-in hybrids on the road. In Germany, we have a population of 80 million, more than double that of California’s, but less than a third the number of EVs (and PHEVs) in California,” said Andreas.

It is interesting to note that Andreas is a real car guy. Prior to his current position at BMW, Andreas was handling corporate communications for BMW’s classic cars activities.

“I am historian by degree, and a car nut, so that’s really why I am with BMW and not a washing machine producer. Keeping the automobile, keeping invidual mobility sustainable for we can keep cars enjoyable for the next 20 30 years is very motivating for me.”