BMW set to squeeze its purchasing bill to help finance shift to electric cars

BMW AIMS TO cut roughly €2 billion (R31.24bn) from its annual purchasing bill by squeezing spending on transmission components and other parts to help finance the shift to electric cars.

Amid plans to roll out at least 12 electric cars by 2025, Munich-based BMW is seeking to trim about 5 percent from costs for car parts alone, which currently totals about €40bn yearly, Markus Duesmann, head of purchasing, said on Wednesday. That compares with a cumulative €4bn reduction that competitor Daimler is seeking in fixed costs, research and development spending and capital expenditures.

BMW, Mercedes-Benz owner Daimler and Volkswagen are projecting that battery-powered vehicles could comprise more than a quarter of their sales by the middle of the next decade.

The German carmakers are pushing for cost reductions to offset weaker margins for electric cars, which Stuttgart-based Daimler estimates could have just half the profitability of conventional models.

“The change in the industry that looms large is significant, it’s coming and there’s no longer the question of when – it’s now,” Duesmann said at the Frankfurt auto show. “The number of balls we have to keep in the air is huge.”

The strategy at BMW includes reducing the range of custom options and boosting competition among component producers, Duesmann said. The manufacturer is set to rely less on buying parts from a single company and will work to cut the number of suppliers that have a monopoly position, he said.

BMW rose 0.6 percent to €84.59 yesterday morning in Frankfurt, paring this year’s loss to 4.8 percent. – Bloomberg