SHENYANG, China -- BMW may need to rapidly ramp up production of electrified vehicles in China to meet an 8 percent target for that could be introduced as early as next year.
Plagued by dense smog in its cities, China is cracking down on combustion engines as a source of air pollution. This helped boost sales of pure electric vehicles by 4.4 percent in the first quarter to 44,333 units, according to the China Association of Automobile Manufacturers.
"Just like all the others, we were below 6 percent last year, and I mean significantly below," BMW China head Olaf Kastner told reporters at a press event here, where the carmaker has a joint venture with local partner Brilliance.
Under draft legislation currently under discussion, China is looking to assign a credit system for so-called New Energy Vehicles (NEVs) such as plug-in hybrids and electric cars to encourage the roll-out of zero and low emission technology while phasing out subsidies.
China may mandate for NEV sales to rise from 8 percent of the new-car fleet in 2018 to 10 percent in 2019 and finally 12 percent in 2020. The quotas however are not fixed: credits are given depending on the powertrain with plug-in hybrids being weighted differently to EVs and fuel cell cars.
For a manufacturer such as BMW Brilliance, which built just over 300,000 cars last year, that would have meant a pro-forma target of 12,000 plug-in hybrids if the quota had been introduced in 2016.
Additionally, the battery has to be built locally all the way down to the cell, although that might be loosened. Fortunately, unlike a Volkswagen, which currently doesn't source cells from a Chinese supplier when building its VW Phideon and Audi A6L plug-in models, BMW struck a deal with Contemporary Amperex Technology Ltd. (CATL), China's dominant cell player in the electric vehicle market.
BMW will have a tough task to boost sales of electrified vehicles because it competes in a high price bracket.
"Electromobility is taking place at present (in a price segment of) up to roughly 20,000 euros here in China when you strip out the subsidies and the local brands are in some cases very strong," Kastner said.
"The big premium manufacturers are not participating in this at all. We are not a player in that segment but it's developing slowly," he said.
BMW's compact X1 xDrive25Le plug-in hybrid, which is only available in China, starts at just under 400,000 CNY (50,000 euros). The i3 EV retails at an even higher price.
Initial reports in Germany say that the Chinese government told German Foreign Minister Sigmar Gabriel during his trip to Beijing last month that the legislation will only go into effect a year later in 2019, after Chancellor Angela Merkel had pushed for a softening of the quotas.
"To be honest, whether the law takes effect in 2018 or 2019, both are very, very soon in our industry," BMW finance chief Nicolas Peter said.