Neue Klasse underpins over 40 new models

BMW’s Neue Klasse is a multi-billion-euro technological overhaul designed to reshape the entire vehicle portfolio. Focused on electrification and digitalization, the program underpins over 40 upcoming models, starting with the electric iX3 SUV and i3 sedan.

Investment researcher Bernstein likes what it sees.

“Neue Klasse represents the largest leap BMW has ever taken in investment and technology, and we believe it will be transformational in positioning the group at the forefront of the industry,” Bernstein said in a report.

First media impressions of the iX3 suggest the claim for 500 miles of range are unlikely to be met, although not meeting official battery range claims is par for the course for EVs. The iX3’s high-speed autoroute performance, with range losses of around 1/3, is similar to most European competitors. This is an area of weakness for Chinese competitors, where high-speed losses can range from 50 to 60%.

The scale of the upcoming threat from the Chinese looks formidable in theory. For the iX3, the European, Japanese and Korea competitive lineup looks familiar with the Audi A6 e-tron quattro, Mercedes GLC, Polestar 3, Porsche Macan, (made in Germany usually) Tesla Model Y, Hyundai’s Genesis GV60, Volvo EX60, and Lexus. But the Chinese threat now includes the XPeng G9, Zeekr 7X, NIO EL8, and BYD Tang. These names won’t be familiar to many Europeans, yet.

Peter Richardson, Research Director at Hong Kong-based Counterpoint Technology, said BMW is one of the more credible legacy EV players in Europe with its electrified vehicles now accounting for 40% of its European sales.

Heart of Joy

Richardson said in an email exchange, Neue Klasse vehicle’s Gen6 “edrive” provides improved efficiency, 800 volt electrical architecture to support faster charging, and cylindrical cells providing improved packaging as well as using the battery pack as a structural component.

“The Heart of Joy control unit, jointly made with Qualcomm, claims to provide superior driving dynamics and stability system for more precise handling and advanced autonomy via Level 2+ semi-automated systems,” Richardson said.

BMW describes its in-house developed central "super-brain" computer debuting in the iX3 as the Heart of Joy. The system replaces fragmented control units by uniting the drivetrain, braking, energy recuperation, and stability systems.

He said BMW’s brand power remains undiminished in Europe.

“However, in China, it has lost market share to Chinese competition that moves faster and prices lower, and has seen BMW's margins and profitability fall, putting a pressure on its overall business,” Richardson said.

In Europe, BMW remains ahead of the Chinese competition, which often positions itself as premium, with long-range claims and fast-charging, and it prices aggressively. But this will come under threat.

Heart of Joy

“The way BMW is staying ahead is to leverage its brand equity and provide a high-quality cabin, with renowned ride-handling balance which can help with superior residual values. However, the Chinese are quick to learn and have fast iterative cycles – they are constantly working to close any gaps and perceived deficiencies in their products, so any lead BMW has now may not last long,” Richardson said.

Felipe Munoz, an industry expert who runs the research platform Car Industry Analysis, said BMW’s Neue Klasse models are the equal of any of the global competition.

“This is why I think BMW is one of the best positioned, non-Chinese carmakers in the EV world right now,” Munoz said in an email exchange.

Munoz said the Chinese have an advantage because of their speed to market. And however strong the European threat becomes, China is certain to play a big part, he said.

Benjamin Kibies, Senior Automotive Analyst at Germany’s Dataforce, said the Chinese have an advantage in battery technology and IT, while the Europeans will prosper although they will need to split their resources between ICE and EV development in the next five years.

“From the perspective of European customers, I think that Europeans are still ahead in terms of overall handling and ease-of-use when it comes to European tastes. Systems are more mature and have fewer issues, and Europeans prefer to have some physical buttons. Combined with brand image, this should give BMW and its peers a lifeline for the next years,” Kibies said.

Fragile and vulnerable to attack

Counterpoint Technology’s Richardson said European manufacturers face a great upheaval over the next 10 years as they grapple with new technology, autonomy, and software requirements. There will be more cooperation as well as competition between Chinese and Europeans, while the European Union’s role could be crucial.

“The competitive moat that European/western (manufacturers) have of strong brand equity, distribution breadth and established customer relationships exists, but it is fragile and vulnerable to attack. What the E.U. does from a governance perspective can potentially assist western car makers but can also hinder them,” Richardson said.