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

The Mercury - - BUSINESS REPORT - Elis­a­beth Behrmann

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

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