BMW is planning to significantly slash its production costs per vehicle by the middle of the decade, in a bid to become more competitive against rivals such as Volkswagen, Mercedes-Benz, and Tesla.
“We will lower the production costs per vehicle by 25% by 2025 – compared with the level in 2019,” BMW board member in charge of production, Milan Ndeljkovic told German newspaper Handelsblatt in a recent interview, as per Reuters.
The interview does not mention as to how BMW plans to achieve such a significant cut, especially in such a short period of time. It’s perhaps even more challenging now as we enter the electric age, as prices for many electric components such as high voltage batteries are still relatively high.
MINI will become the first fully-electric brand in BMW Group.
And then there’s development costs for all-new electric platforms. To make matters even worse for carmakers, the focus on eco-friendly material sourcing and production method will no doubt take a toll on their profit margins, too.
The big question for us consumers though, is if the drop in production cost will result in reduction in car prices. While the intention to become more competitive in the market certainly sounds encouraging, it’s important to remember that car prices are not based solely on cost.
Only time will tell what the cost-cutting measures will translate to in their end products, but for now, we won’t keep our hopes up, as cost-cutting can range from discontinuing variants or models with less demand, to plainly just sourcing for cheaper materials.
In related news, BMW said last month that it is still on course to meet its profit targets for 2021, despite the rising costs of raw materials. The company is also bullish on its 2021 targets, even though the global semiconductor shortage could impact its production schedule.
