BMW’s Hydrogen Fueled Future

The Automobile Industry

Given the undeniable evidence of global warming, transportation’s large contribution to the global CO2 emissions makes the industry a prime target for government regulations but also one with opportunities to innovate and capture value.

Transportation’s energy source has historically been largely petroleum with little dependencies on renewal energy. However, we have seen in recent years the push towards more sustainable means due to governmental, competitive, and public relations pressures.

BMW, one of the world’s foremost luxury automobile manufacturer, faces a particularly daunting challenge to shift towards renewal energy as its primary markets (the EU and US) has aggressive emissions targets mandated by their respective governments. In addition, it also faces Tesla, a luxury electric car manufacturer, who entered the already competitive luxury automobile market.

Apparent in the most recent COP21 conference, the pressure to shift towards sustainable energy sources is further mounting. This lead to the European Automobile Manufacturer’s Association (ACEA), the main lobbying and standards group of the automobile industry that BMW of is a member of, to establish a framework on how they envision addressing the challenges of climate change. [1]

 

BMW’s Vision and Approach

For over 10 years, BMW has been investing in the development of automobiles that can use alternative energy sources. More specifically, BMW’s vision of the ultimate solution for sustainability is through hydrogen cell fueled cars. [2] This idea, along with the vision of more broadly designing cars that are highly fuel efficient is what the BMW CleanEnergy initiative comprises.

In 2006, BMW unveiled the Hydrogen 7, the company’s first foray into production-ready hydrogen cell fueled cars. While it was an engineering feat at the time, there were limitations to this model. The car had a slower high speed than its petroleum consume counterpart (the BMW 7 Series), weighed more, and had a base price tag of over $100,000 USD. Most importantly, the car was actually less fuel efficient in its consumption of hydrogen compared to petroleum (normalized on volume consumed vs. distance traveled) not to mention the need for an infrastructure to deliver hydrogen to customers. [3]

Recognizing the large gap between where the technology and infrastructure currently is and where it needs to be, BMW decided that it needed to buy time while still working towards minimizing emissions and ultimately having a sustainable product.

To do so, they focused on two shorter-term goals:

1. Optimize existing technologies
2. Debut BMW’s own electric cars

Optimizing existing technologies: This meant making their existing gas guzzling luxury sports cars run more efficiently without sacrificing performance. This came in several forms [4]:

• Lightweight construction of the body of the car such as using carbon in the passenger cell and aluminum in the chassis (“BMW EfficientLightweight”)
• Better aerodynamics
• Better energy management through features such as the “Intelligent Start Stop” function that automatically shuts off the engine during the drive

Electric cars: In 2014, debuted the i8, a luxury sports car costing $140,700 MSRP, and the more affordable i3, a five-door urban electric car at $42,400 MSRP.

The two short-term strategies combined has since helped BMW lower their emissions from 145 grams of CO2 per km in 2011 to 127 g CO2/km 2015. [5] However, BMW maintains the vision to have hydrogen cell fueled cars as the long-term solution. As it currently stands, a mass market hydrogen-powered BMW will not be available until after the components are ready in 2020. [6]

 

Can they do more?

While BMW seems to be doing well with their short-term goals, it is critical that they increase their pace of development and introduction of their hydrogen-powered automobiles to the market. With Tesla and other competitors pushing electric cars aggressively into the market, consumers are starting to develop habits and trust around that technology. If BMW truly believes hydrogen is the future, their late entry into the market and potential need to change consumer habits/preferences away from electric cars may prove challenging.

In addition, they will need to invest heavily into building the infrastructure for consumers to refuel their hydrogen fueled cars conveniently. Tesla has already been investing heavily in researching superchargers and investigating multiple alternatives to not just meet but exceed the current level of convenience with gas cars. Hence, the wide-spread adoption of BMW’s hydrogen cell fueled cars will also depend heavily on their ability to build an infrastructure to service these type of cars.

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Sources:

Exhibit 1: International Energy Agency, “Transport, Energy, and CO2: Moving Toward Sustainability” (PDF file), downloaded from IEA website, https://www.iea.org, accessed November 3, 2016.

Exhibit 2 and [1]: European Automobile Manufacturers Association, “ACEA Position Paper: The COP21 Climate Change Conference” (PDF file), downloaded from ACEA website, http://www.acea.be/, accessed November 3, 2016.

[2]: Bruno Vanzieleghem, “BMW official announces the BMW Hydrogen 7,” AutoBlog, September 12, 2006, http://www.autoblog.com/, accessed November 2016.

[3]: Ronald M. Dell, Patrick T. Moseley, and David A. J. Rand, Towards Sustainable Road Transport (Academic Press, 2014), p. 282.

[4]: BMW, “BMW EfficientDynamics”, http://www.bmw.com/com/en/insights/technology/efficientdynamics/2015/index.html, accessed November 2016

[5]: BMW, Sustainable Value Report 2015, p. 13

[6] and Cover Photo: Ronan Glon, “While You’re Charging Your EV, BMW is preparing for a hydrogen future,” Digital Trends, March 27, 2016, http://www.digitaltrends.com/, accessed November 2016