BMW will spend big to keep green lead

MUNICH -- BMW says it will fight to keep its lead in fuel-saving technology over rival Mercedes-Benz despite the high cost.

The company’s top executives admitted earlier this month that BMW’s Efficient Dynamics technology is hurting its bottom line.

Chief Financial Officer Stefan Krause said the cost of developing the carmaker’s new fuel-saving technologies had hit the company especially hard in the second quarter. Research and development costs rose nearly 40 percent to €835 million during the period. The carmaker’s net profit in the second quarter fell 4.3 percent to €753 million.

“Efficient Dynamics delivers a competitive advantage but pricing for these measures will remain a challenge. Over time we will solve it,” Krause told financial analysts August 1.

BMW CEO Norbert Reithofer told analysts: “We are convinced these measures will pay off in the long term. We are where other automakers want to be.”

Reithofer said 40 percent of BMW’s new-car fleet will have CO2 emissions of 140g/km or less by the autumn.

Buyers won’t pay

Analysts say BMW will not be able to pass on the cost of its green technologies to car buyers.

“Consumers do want their cars to be green, but many aren’t prepared to pay for it,” said Stephen Cheetham, an automotive analyst at Bernstein Research in London. “BMW’s strategy seems to be based on being first to the marketplace with this new technology and offering it as another reason to chose a BMW.”

BMW’s Efficient Dynamics technology includes a stop-start system that switches off the engine when the car is not moving. It also features regenerative braking, a system that captures energy from braking to recharge the car’s battery.

The technology was introduced in the 1 series in April. By autumn, the 3 series model line will have the system. When that happens, CO2 emissions will fall to 123 grams per kilometer from 150g/km for the 318d, making it BMW’s cleanest model.

Mercedes fights back

Thomas Weber, head of research and development at Mercedes-Benz parent DaimlerChrysler, says Mercedes aims to catch and pass BMW in the race to be green. It will start by introducing stop-start technology in the A- and B-class entry-premium cars at the IAA in Frankfurt in

September. Stop-start eventually will be offered throughout the carmaker’s lineup.

Herbert Kohler, DaimlerChrysler’s chief environmental officer, says 38 percent of Mercedes’ new-car fleet emits less than 150g/km.

D/C’s r&d costs fell 10 percent to €1.01 billion in the first quarter. The company releases its second-quarter results on August 29.

Europe’s carmakers need to invest to make cars more fuel-efficient. The EU is preparing legislation to limit CO2 emissions from Europe’s new-car fleet to an average of 130g/km by 2012 from about 160g/km now.

BMW’s CO2 emissions were 192g/km and Mercedes’ 185g/km in 2005, according to the European Federation for Transport and Environment, a lobbying group.

Tony Lewin contributed

You may e-mail James Franey at jfraney@craincom.de

You may e-mail Luca Ciferri at lciferri@craincom.de