- The dispute over federal loans for electric vehicles shows how cost sensitive automakers are in these early days of battery electric vehicles selling in small numbers and generally at a loss.
- Joachim Post oversees a network of 5,000 Tier 1 suppliers and a further 75,000 at the lower tiers who supply 30 million parts per day to BMW’s 30+ vehicle and powertrain plants.
- As parts shortages continue, Post says recycled raw materials have become crucial. “We use the junk,” and that includes recycled battery materials from consumer electronics.
European officials are unanimous in their dislike for President Biden’s Inflation Reduction Act, claiming that it puts foreign-based companies – like European automakers – at a significant disadvantage compared to their American counterparts.
Joachim Post, BMW board member for purchasing and supplier network, shares concerns that German-built all-electric BMWs, like the now-available i4 sedan and iX crossover, will no longer qualify for significant federal tax credits of around $7500 for U.S. buyers . But he also dances around the topic when he speaks to journalists recently.
“All the governments of the world are thinking about stuff like this,” says Post, a 50-year-old engineer who has worked for BMW since 2002, when asked about controversial U.S. legislation that emphasizes clean energy technologies — including critical minerals for batteries-manufactured in America. It went into effect when the President signed the law into law in August.
According to Post, BMW Group top management has been heavily involved in European discussions on anti-inflation law for weeks, and he expects those talks to intensify by the end of the year.
“I think competition is important,” Post says when asked if he thinks domestic U.S. automakers, with their vehicle production and parts sourcing focused in North America, suddenly have a head start on government incentives for those purchases protects. He spoke to reporters during the recent launch of BMW’s all-new 7 Series sedan in Southern California.
BMW — as well as Hyundai and its management and government officials in South Korea — have openly called on the Biden administration to appear to discourage EV sales after years of the President’s talk of EVs in the fight against climate change.
Until that problem is solved, Post says the wisest strategy BMW can pursue is the one the automaker has had for decades: local by local, building vehicles — and more recently, batteries in the case of electric vehicles — in markets in which they will be sold.
BMW recently announced a $1 billion investment in the production of next-generation electric vehicles at its Spartanburg, South Carolina plant, as well as a $700 million investment in a nearby plant to assemble high-voltage battery cells. Incidentally, these plans predated the IRA signing.
If those new class EVs will hit the market in Spartanburg in 2025, according to the Post, BMW could be close to the tipping point if EV sales outstrip combustion engine models.
The investment in Spartanburg represents a “local for local” solution that will qualify BMW vehicles (as well as the automaker) for important federal tax credits, but it will take at least a few years to complete construction before these new products hit the market come.
This shows how cost sensitive automakers are in these early days of battery electric vehicles selling in small numbers and generally at a loss. (Click here to see BMW’s letter to US dealers on the Inflation Reduction Act.) Hyundai is in the same boat with its new EV plant under construction near Savannah, Georgia.
Away from politics, Post prefers to look to the future, as the BMW Group plans to build at least six all-electric models in the U.S. by 2030, and it’s his job to build out the component supply chain. He already oversees a network of 5,000 Tier 1 suppliers and a further 75,000 at the lower tiers that supply around 30 million parts daily to BMW’s 30+ vehicle and powertrain plants worldwide.
He’s the guy who fixes daily supply shortages and has to find clever ways to get enough semiconductors and raw materials for vehicle production even during a pandemic.
You’d think Post would lie awake at night worrying about a blockage in the Suez Canal or a shortage of wiring harnesses from Ukraine, but he says he’s sleeping well. “Anyone who can’t do that should never take responsibility for purchasing as a board member.”
Post says many of BMW’s long-time suppliers of traditional powertrain components are focused on making electric motors, cooling systems, wiring and other materials necessary for electric vehicles.
“Transformation is possible,” he says of existing suppliers, but he also knows it won’t happen immediately, meaning dual supply chains will be necessary for a while as automakers produce both EVs and ICE vehicles.
“We say it takes time,” says Post. “For a long time, all powertrains have been very important. We are also investing in hydrogen,” particularly in markets that are fully committed to carbon reduction goals. He said a small fleet of fuel cell-powered iX5 crossovers will be deployed this year for demonstration purposes.
Post emphasizes the importance of long-term agreements – especially to hedge against part shortages and volatile price fluctuations for raw materials.
“The raw material situation we expect to remain tense, especially lithium and nickel,” he says. “So if you look at the forecast up to 2030, we’re trying to make the supply chain more vertical to get direct access to material.” The Post points to cobalt as an element that BMW buys directly on behalf of its battery suppliers.
Establishing new mines is expensive and takes a long time for regulatory approvals, and he says BMW is currently exploring potential sites in Argentina and Chile where lithium could be “sustainably mined.”
In order to ensure an adequate supply of battery cells, the BMW Group has increased the purchasing volume for its latest generation battery platform from 12 billion euros to over 20 billion euros. “Our partners are building five new gigafactories to meet our demand,” he told investors in a recent video.
As parts shortages continue, Post says recycled raw materials have become critical to the supply chain. “We use the junk,” and that includes recycled battery materials from consumer electronics.
“It’s a very valued recycled material,” he says. “You can significantly reduce your carbon footprint by using recycled battery material to build new batteries. Our goal is to reuse 90% of a battery through recycling in the future.” Considering that large car batteries in new electric vehicles haven’t been recycled for about a decade, “consumer electronics scrapping plays a big role in the short term,” says Post.
The next-gen Mini Countryman, due out next year, will be the first of many future BMW and Mini vehicles to offer wheels made from 80% recycled aluminum, which supports the “circularity” the Post says is for the future supply chain is crucial . “We think that recycled material will become more important in the future,” says Post, not only because of reduced emissions, but also for cost reasons.
Meanwhile, BMW recently faced a social media storm when a customer in South Korea complained that they had to pay a subscription fee to activate their BMW’s heated seats. This is not a problem in the US, as this feature is standard here.
Post describes these “flexible options” as hardware that could be built into all vehicles, which makes sense from a production efficiency standpoint, and then activated with remotely downloaded software for a fee. “Some customers like it, some don’t like it, but we put it in every car because it’s cheaper,” says Post.
Given the plethora of subscription fees already on offer for satellite radio, streaming video services and telematics, it’s possible we’ll see more examples of this model from many automakers.
As a reminder, 13% of vehicles sold globally by the BMW Group in 2021 were electrified vehicles (including plug-in hybrids), up from 5.7% in 2018.
Are BMW, Hyundai and other corporations entitled to protest against the provisions of the anti-inflation law? Please comment below.