BMW’s Investments Combined with Its Multi-pronged Strategy Demonstrate How Traditional Automotive OEMs Can Prepare for the EV Era

By Michael Larner | 2Q 2024 | IN-7310

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In a recent interview Petra Peterhänsel, the plant manager for BMW's facility in Leipzig, is quoted as saying "Our future viability is not a given." This quote should concentrate the minds of leaders of all automobile Original Equipment Manufacturers (OEMs) and companies operating in the automobile manufacturing value chain.

ABI Research's Digital Transformation of Automobile Manufacturing report (AN-5626) outlined the wide-ranging operational challenges and external threats faced by established automobile manufacturers such as competition from China-based manufacturers targeting the European market, rising energy prices, and a shortage of skilled workers. Manufacturers need to transition their product lineups away from Internal Combustion Engine (ICE)-based vehicles.

BMW is looking to meet these challenges with its Neue Klasse architecture dedicated to Electric Vehicles (EVs) and is implementing its iFactory manufacturing strategy, which emphasizes that the company needs to be lean, green, and digital to be successful in the coming years.

Neue Klasse is an overarching architecture for BMW's transition to EVs that not only involves developing an electric drive and new batteries, but also entirely new models. It is underpinned by brand new Information Technology (IT) and software infrastructure, and also looks to further embed sustainability across the operations.

The company's plant in Munich, which has been producing engines and vehicles for over a century, will begin production of an electric sedan based on the Neue Klasse architecture in 2026 and only EVs from 2027. The plant is being overhauled at a cost of €650 million (including new halls for body assembly and logistics). But production can't stop while the overhaul is taking place, with the plant producing over 1,000 vehicles daily.

Digitalization has had and continues to have a key role in transferring production to EVs. During this decade, BMW has been using digital technologies to plan for and deliver new production techniques and production lines. The company has developed a Three-Dimensional (3D) scan of the entire facility in Munich that provides images to support the planning process for the layout of the facility, which are fed to the firm's instance of NVIDIA's Omniverse platform (see the case study in AN-5626). Teams of engineers and assembly planners can collaborate and evaluate photorealistic real-time simulations of the impacts their changes would make on the factory floor. When fully operational, BMW anticipates that the plant will reduce its manufacturing costs by 25% compared to 2019 levels; driven by the reduction in the number of parts, increased use of recycled materials, and more energy-efficient production processes.

The overhaul at the company's largest facility in Spartanburg, South Carolina, and a neighboring site is on an even bigger scale-to the tune of US$1.7 billion, with US$1 billion earmarked for upgrading the facilities in Spartanburg (the body shops, paint shops, and assembly halls, along with the ability to assemble Plug-in Hybrid (PHEV) batteries and make adjustments to logistics warehouses and packing centers) and US$700 million for establishing a battery assembly facility nearby in Woodruff. Again in 2026, BMW will commence production of EVs based on the Neue Klasse architecture, alongside ICE and hybrid variants, and the plan is for the Spartanburg facility to be producing six electric models by 2030.

Implementing the iFactory strategy at this site includes using advanced vision systems and Artificial Intelligence (AI) in the body and paint shops to ensure quality levels and the creation of digital twins to support the planning processes to introduce and integrate the new models in the assembly halls.

BMW is planning to sell more than 500,000 EVs in 2024 (representing a 20% volume share) and EVs will account for 50% of 2030's volumes. This target, as well as the cuts in manufacturing costs, will necessitate a strategy that involves design, engineering, and manufacturing teams working in close alignment. Furthermore, assembly lines will need to accommodate local market demand for various types of power trains.

The potential of digital twins to support collaboration efforts garners a lot of attention. However, the iFactory strategy requires large sections of BMW's workforce to embrace and utilize digital technologies. The company's IT teams encourage and enable employees, even those with little coding expertise, to create software applications that enhance their workflows. The adoption of no-code/low-code platforms accelerates the introduction of new applications on the factory floor. One way to facilitate the creation and uptake of new applications has been running hackathons. A recent hackathon involved 40 staff members who created 20 new apps during the session that can support their workflows, including a mobile app for scanning and reporting damaged packages when they are delivered to the factory.

Upskilling staff is a major undertaking for BMW with the company announcing that it plans to provide 80,000 staff members (out of the company's 150,000 employees) a "digital boost" that ranges from basic to advanced qualifications. One method of delivering the digital boosts is investing in training centers such as the US$20 million outlay in Spartanburg. The center trains staff members in developing and utilizing digital twins, advanced robotics, and the use of technologies to support laser welding or machine vision systems, many of the technologies that are critical to support the move to electric-powered vehicles.

The investment in training centers will help BMW retain and attract staff. Furthermore, the employee development strategy will support the company's goals of being lean and green, and help ensure BMW's viability going forward.