In last week’s post, we looked at the impact that Tesla’s Model S has had on the sales of competing vehicles in the large luxury segment in the US. That set the table for the question of whether or not the Model 3 can have equal or perhaps even greater success in the entry level, premium segment when it hits the streets sometime in the end of 2017 or early 2018. That segment has been owned by BMW’s 3-Series for decades, and BMW isn’t going to just give it up without a fight.

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But what exactly can they do? The Model 3 has captured the imagination of the public and Tesla has received over 400,000 reservations in the first three weeks since the reservation process has opened. That staggering number has undoubtedly caused a few sleepless nights for product planners of various OEMs. In fact, if we look at theory of Diffusion of Innovations, the interest in the Model 3 would absolutely prove that the electric vehicle market has now moved beyond the innovators and early adopters, and we are now well into the early majority phase. That’s good news for Tesla, but is BMW also ready to capitalize on the inevitable market shift we are witnessing?

The short answer is yes, they absolutely can. In fact they are probably positioned better than any other OEM to do so because of the tremendous investment that they have made in BMW i. They’ve poured billions into the i division, and it wasn’t just for the i3 and i8. Lessons learned working with CFRP, aluminum and a variety of sustainable materials and manufacturing processes will be carried into future plug-ins. In fact, it’s doubtful any auto manufacturer has spent more restructuring the company in preparation for the shift to electrics, than BMW has over the past seven years.

However, the remarkable Model 3 reservation list probably indicates that they need to accelerate their EV programs and bring some vehicles to market a little sooner than they might have planned if they want to minimize defection from the brand. The good news for BMW is that Tesla can have a million reservations, and that won’t mean they can actually make the cars fast enough to satisfy demand. In fact, every car Tesla has released so far has has been delayed, and even when they initially “launch” the vehicle, it takes them 4 to 6 months before they are making them in serious volume and the first few months of production are usually plagued with quality issues.

So even if Tesla does manage to have a few ceremonial Model 3 deliveries in late 2017 as promised, they probably won’t be making them in volume much before the summer of 2018, and I highly doubt they will deliver more than 30,000 to 40,000 Model 3s before the end of 2018. By the time 2019 rolls around, Tesla will likely have any initial quality issues worked out and will be able to begin really producing the vehicle in high volume. So BMW has about three years to produce a vehicle to compete in this segment which will curb mass defection from the loyal 3-Series following, as well as keep the BMW name synonymous with innovation, performance and sustainability.

Does BMW have a vehicle in development that can compete in this class that has already been green-lighted for production? Yes they do, the 2020 i5. We’ve all read an assortment of i5 predictions from various “BMW insiders” ranging from it being a hydrogen fuel cell vehicle, to an EV with a range extender. If BMW is serious about competing in this space than it shouldn’t be either. The i5 needs to be a long range electric vehicle, there’s no need to mess around with range extenders or fuel cells. The remainder of this post is purely my thoughts and predictions on what BMW should and could do to remain a leader in the industry. I have nothing concrete to base these opinions on, and everything you read below is purely speculative.

The cornerstone of the BMW i will be the 2020 i5 which will launch in mid 2019 with the following specs:

Five door hatchback w/seating for five

Aluminum frame, CFRP body same as i3 & i8

78.75 kWh battery pack, with 70kWh is usable

EPA rated range of 245 MPC

Capable of charging at 150kW.

345 hp and 375 lb-ft torque. 0-62 mph in 5.0 seconds

All wheel drive option

Options include HUD, panoramic roof, various “BMW Driver Assistant” autonomous driving features.

So why doesn’t BMW bring the i5 to market sooner and beat Tesla to the punch? Is it because they don’t think the market is ready, or they just don’t believe in long range electric cars just yet? The answer to both of those questions is no. It’s all about the batteries. Tesla knows this, and refused to wait for the market to bring cutting edge battery cells to them. Instead they are building what will be the largest battery factory in the world, to supply their cars with the best batteries as soon as they are available. BMW, along with the rest of the OEMs, will rely on third party suppliers for their battery cells. It’s too early to tell which strategy is best, but once the Gigafactory is operational, it should provide Tesla with the advantage of having the best cells available and at a lower cost, but that has not yet been proven.

Why 2019? That’s because Samsung SDI, BMW’s battery partner is scheduled to bring to market their next generation lithium ion battery cell sometime in 2019. These new cells have been described by Samsung as the “Low Height Pack” cell generation because they aren’t nearly as tall as the batteries currently used in the i3 which will allow for a lower seating position. However, the real progress is in the specific energy of the cells and the cost. The current i3 uses 60Ah cells that are believed to have a specific energy of 130 Wh/kg. The 2017 i3 is rumored to be using the latest Samsung SDI cells that are the same physical size as the 60Ah cells, but are 94Ah with a specific energy of about 190 Wh/kg. These new cells are going to increase the i3’s range from 81 miles per charge to about 120 MPC. However that still isn’t good enough for the long range Model 3 competitor that the i5 needs to be. The 2020 i5 will use Samsung’s Low Height Pack cells that are estimated to be about 125Ah with a specific energy of about 250Wh/kg, nearly double the energy density of what the current i3 batteries have and cost less than the current 60Ah cells do. These cells will allow BMW to stuff a 78.75kWh battery pack in the i5 and still keep the weight at about 4,000lbs.

The i5’s battery pack I’m designing would consist of 14 modules, each containing 12 battery cells for a total of 168 cells. If BMW allows 90% of the pack to be available, that means 70kWh of usable energy and an EPA range of about 245 miles per charge. It will also accept up to 150kW of DC power and utilize the emerging network of 150kW DC fast chargers that, by then, will begin being funded by members of the CharIn EV association. The network will be minuscule compared to Tesla’s Supercharger network, and Tesla still has a huge advantage there, but at least customers will see a path to what someday could rival the Supercharger network, which currently doesn’t exist. I’m not even ruling out a partnership with Tesla, where the other OEMs pay Tesla to install 150kW CCS stations at every Supercharger location. After all, at Audi’s 2014 LA Auto Show press conference, the automaker promised they would have a network of 150kW DC Fast charge stations installed and operational before they launch the 2019 e-tron Quattro. How else could they accomplish that?

Granted, even if BMW hits the mark with the i5, the Model 3 is going to be a widely popular vehicle as long as Tesla can manage to deliver what they have promised. However, a strong competitor from BMW like what the i5 has the potential to be, can limit the number of sales the Model 3 takes from BMW in this segment. The i5 will cost more than the Model 3, starting at $49,990. However the standard i5 will be better optioned than the standard Model 3, and I believe a loaded Model 3 will end up costing around $60K anyway. Therefore the average purchase price of the two cars may only be $6,000 to $8,000 apart.

That said, the i5 isn’t the only plug they’ll have in 2020. By then BMW’s entire array of models will offer PHEV options. They already sell the X5 40e plus the 330e, and by the end of the year will have the 740e in showrooms. Sometime in 2017 the 540e will be added to the iPerformance PHEV line. These are all very competent PHEVs, and the reviews have been very positive with regards to the driving experience they offer. The only problem I have with these cars is the AER. None of these vehicles boast an EPA range of even fifteen miles per charge, and I just don’t find that acceptable in 2016. If BMW wants customers to see the value in paying more for the plug in version of any car in their line, it has to deliver an electric range that can save them a reasonable amount in fuel to offset the couple thousand dollars extra the vehicle costs, and 13 miles of electric then range doesn’t do it.

BMW needs to upgrade the batteries in their PHEVs to the higher density cells coming to market now, and then again in 2019. If BMW were to use the higher energy cells available later this year, the AER of their iPerformance PHEVs would jump up to about 20 miles per charge without increasing the battery’s physical size or weight. Then, in 2019 when the 125Ah cells are available, they can bring the 2nd generation PHEVs to market with a boost to 30 – 40 miles of electric range. This won’t satisfy the hardcore EV aficionado, but there will be plenty of people looking to buy their first plug in. These people aren’t ready for a 100% electric car, and a PHEV with a respectable AER will bring them (or keep them loyal) to the brand.

The final piece of the puzzle is the 2nd generation i3. Using Samsung’s Low Height pack 125Ah cells means BMW can offer a 48kWh i3 which would most likely have about a 180 mile electric range. I expect BMW to stick with the range extender option when the 2nd generation i3 is released so the choices will be the 180 mile BEV and a REx that has about 325 miles of combined range, and both versions will charge at 150kW like the i5. I also expect it to have the functionality to turn the REx on manually when the operator wishes, because BMW will have worked out the issues with CARB and the BEVx designation which is why the current i3’s range extender is restricted from using the built in Hold SOC Mode that European i3 owners get to use. Expect the gen 2 i3 to be slightly larger than the current model, and I’m betting BMW will replace the rear coach doors with conventionally opening ones. They will also figure out how to add a third seat in the back. BMW will improve the drivetrain efficiency as well as add about 20 hp and 25 left of torque. 0 to 60 times for the BEV will be in the mid 6 second range.

One last prediction. In 2018 BMW will introduce the MINI Rocketman and it will be available in pure BEV and use many of the i3’s components. It will have about a 100 mile range and at launch be available only as a hardtop. However, the following model year it will also be offered in convertible trim, finally giving the EV faithful an attractive and sporty electric ragtop offering.

While BMW’s i5 will be the Model 3’s direct competitor, I believe it’s going to take an entire portfolio of plug-ins for BMW to remain competitive in the ever expanding plug-in market. While BMW absolutely needs a flagship long distance pure EV, there is no one size fits all in the automobile industry, and the plug-in market is no exception. This is one area where BMW has a clear advantage over Tesla. By 2020, BMW will have no less than seven models with plugs in their showrooms, and most likely that number may actually be closer to ten models. If the incredible amount of reservations the Model 3 has amassed has proven anything, it’s that the public is absolutely ready for compelling electric vehicle options. Tesla has captured the imagination of the world. They’ve proven that it can indeed be done and people want to support them for doing so.

Your move, BMW!