BMW bets on a 'Neue Klasse' revival to catch Tesla

MUNICH: BMW is once again turning to the "Neue Klasse" brand - this time as an electric vehicle - as the German automaker seeks to replicate past successes to catch up with trailblazer Tesla.

During the early 1960s, BMW (BMWG.DE) was a struggling enterprise with an uncertain future, overshadowed by Volkswagen (VOWG_p.DE), Mercedes-Benz (MBGn.DE) and the giants of Detroit.

The company's leaders put all their chips behind a new car they called the "Neue Klasse," or "new class." Launched in 1962 as the BMW 1800, the Neue Klasse set the German automaker on course to become "the ultimate driving machine" company and one of the most successful brands in any industry.

Now, BMW is at another crossroads, and is turning again to a "Neue Klasse" to drive a new strategic direction.

BMW debuted at the Munich autoshow on Saturday a prototype for a "Neue Klasse" electric vehicle (EV) roughly the size of the current 3-series, the company's best-selling model line.

The show car features panoramic information "head-up" displays projected on the windshield, as well as some traditional BMW design elements such as a distinctive angle - the Hofmeister kink named for the designer of the original Neue Klasse - in the rear side windows and the dashboard screen.

"We want to make this vehicle generation so modern that it looks like we skipped one generation," BMW Chief Designer Adrian van Hooydonk said. "That is necessary because of those new players that are coming in. You know the debate that’s been going on: Oh, traditional OEM (manufacturer) over 100 years old, can you make this step? We can and we want to."

The show car previews a multibillion-euro effort to jump the technology gap with Tesla (TSLA.O) and other EV makers that are winning customers with models and software-driven features many current BMWs do not match.

That is despite BMW being relatively early to embrace EVs with the launch of the i3 compact in 2013 - a car that never shifted large volumes and was eventually discontinued in 2022.

"Neue Klasse is by far the biggest investment in our history. Because the technology we are using all over BMW is all new in all areas, without exception," Frank Weber, BMW's chief technology officer, said in an interview ahead of the Munich event.

BMW executives did not disclose the total investment figures. The company is investing 2 billion euros ($2.2 billion)in new battery-making and assembly operations for the Neue Klasse at a plant in Hungary, one of the first factories to start building the vehicles.

When real Neue Klasse vehicles start to go down assembly lines in 2025, they will arrive 13 years after Tesla launched the Model S and redefined the ultimate driving machine for many affluent customers. Tesla and other EV startups already use key elements of the Neue Klasse design, such as a battery pack that forms part of the vehicle's body structure to reduce weight and assembly cost.

'COMPETITIVE OFFER'

BMW's new compact models will enter a competitive segment where Tesla has started a price war. BMW has not announced prices for the Neue Klasse.

“It will be a very competitive offer," Chief Executive Oliver Zipse told reporters ahead of the show. "We will not price ourselves out of this market.”

Tesla has also redrawn the business model around the vehicle - selling directly to customers, using over-the-air software upgrades to add features and constantly capturing vehicle data to improve driver assistance and other features.

"There is a multi faceted transformation that needs to take place" for established automakers such as BMW, said Evangelos Simoudis, a Silicon Valley venture capital investor and expert on vehicle software strategies.

Neue Klasse vehicles will be powered by 48-millimeter-diameter cylindrical batteries in different lengths. The batteries are similar in size and shape to those Tesla plans to use in its Cybertruck and other models.

The Neue Klasse is targeting a 50% reduction in battery pack costs and 25% more range per kilowatt-hour, a measure of efficiency, executives said.

BMW has begun overhauling its Main assembly plant in Munich, adjacent to the company's headquarters, to build Neue Klasse vehicles, which will eventually replace current combustion models including the 3-series sedan and X3 utility vehicles.

The software systems and battery technology behind the Neue Klasse vehicles will be as challenging for BMW as the manufacturing transformation, if not more so.

Neue Klasse vehicles will have four "super brains," to control propulsion, driver assistance systems, infotainment and other functions, Weber said. BMW is developing the driver assistance system with chipmaker Qualcomm. It is developing the propulsion and chassis controllers in-house, Weber said.

BMW is rolling the dice on using head-up displays, projected on the windshield, to counter the large video screens Tesla, Mercedes and others are using to pipe maps, music, conference calls and video games to drivers and passengers. Small head-up displays have been offered by automakers for years.

"We are convinced head-up is the best way to display information," said Stephan Durach, senior vice president for connected company development.

Developing the large-scale windshield displays has not been easy, Durach said in an interview. "It goes deep into the overall architecture of the car. You get rid of the instrument cluster, you do your steering wheels in a different way."