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EDITORIAL
BMW is right to have a foot in both camps, but the payback may take longer than expected

AID Newsletter Editorial 1323 from Peter Schmidt - December 18th 2013


BMW i3 charging Germany

Open quote signThe good news for Europe’s car market is that a poor year has almost ended. But the bad news for the market is that the ill-effects and associated consumer gloom first sparked by the eurozone’s economic crisis will continue to grip car showrooms in much of Western Europe.

With few exceptions like Europe’s prestige car makers and their main suppliers, for most companies trying to earn a living in Europe’s still woefully deficient automotive market, this was a poor year. 

Same goes for last year, or for that matter the last handful of years. 

The prospects for next year and beyond? 

Likelihood is that sales will continue to creep back, but the underlying car sales recovery will be a weak affair. 

Nothing like this year’s fully fledged US-type rebound. 

None of that comes as a shock. 

For some the writing was already on the wall back in early 2009. 

That’s in the sense that AID for one was adamant at the time that a notable and sustainable car sales recovery in Europe could not be expected until 2014 at the very earliest. 

Fast forward five or so years, and the way things are looking today, nothing has really changed since then. 

If anything, consensus expectations among ardent market observers and analysts are universally dismal. 

In a nutshell, many believe that it could be until the end of this decade before Europe’s car sales will again approach the levels seen in the region’s pre-crisis years. 

Some are still more pessimistic. 

If there is a club of market watchers who believe that the recently endured crisis has left deep scars in consumers’ psyche, which in turn will shape the future purchase of large ticket items like cars, I for one will be willingly join it.

Given that by common consent urbanisation in Europe will be the trend of the future, and not just in Europe, more and more city dwellers are expected to steer away from the ‘must-have-my-own-wheels’ culture of the past. 

Small wonder that urban car-sharing schemes like BMW’s DriveNow scheme appear to gain in popularity, especially, it seems, among Europe’s economically vulnerable young. 

Add to that an already smooth running, convenient and affordable public transport network, most town dwellers forced by necessity to live in rented apartments, and what you’ve got is a probable future trend.

Such a scenario likely leads to markedly lower than earlier anticipated European new car sales in the 2020s. 

By historical standards, that’s bad news for the carmakers. 

Yet, these trends also offer a potential ‘Get out of jail card’ for those carmakers who have bet their house on a rosy electric car future in Europe. 

Not in the short term, however. 

The way things have progressed along of late, even the electric car industry’s biggest cheerleader – Nissan’s highly respected Carlos Ghosn – recently conceded that the take-up rate of electric cars has failed to live up to his high earlier expectations. 

He is right to do so and deserves full credit for his candour. 

Even the briefest look at latest hard electric car registration numbers in the US, Europe and even tightly packed Japan, today there seems precious little to cheer about the consumer reception of the Leaf, ZOE, Volt/Ampera or even Toyota’s Plug-in Prius. 

Early days, but BMW’s cunning visionaries, when pumping massive investment into their electric i3 venture, already spotted a potential safety net if their i3 sales/leasing strategy fails to get off the ground. 

Asked by AID if the i3 will also be heading for its DriveNow carsharing scheme BMW said yes. 

In a market like Germany, where the ruling government pulled the plug on nuclear energy and is now determined to produce up to 75 per cent of its future electricity from renewable energy, eventually, given the right assistance, electric cars like BMW’s i3 clearly make sense not only in Germany, but in a world that is rapidly urbanizing.

The jury may be out on whether these latest generation electric cars make sense eventually as a logical future replacement for today’s conventionally powered cars in the mid to late 2020s. 

But the prospect of serving mainly in a financially viable car-sharing fleet in an urban environment looks a great deal more promising. 

Sparked up by convenient fast-charging stations, used round the clock by BMW’s DriveNow and Mercedes’ car2go type members, the concept looks promising if the usual minute-by-minute rental cost to members can be kept at attractive levels.
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