BMW Unveils High-Tech New 5 Series As Luxury War With Mercedes Escalates

Illustration for article titled BMW Unveils High-Tech New 5 Series As Luxury War With Mercedes Escalates
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1st Gear: What Did You Do In The War, Daddy? I Sold Luxury Cars

Locked in an eternal death struggle for luxury car sales dominance are BMW and Mercedes, and the latter has extended its lead as the crossover market continues to grow exponentially.

Here’s a report from the field via Bloomberg in Automotive News:

A jump in deliveries of SUVs and crossovers helped Mercedes increase sales almost twice as fast as BMW in the first nine months, expanding the Daimler AG unit’s lead to 57,985 cars, according to data released by the manufacturers.

Mercedes is poised to achieve its 2020 target of unseating BMW AG’s namesake brand as the world’s biggest seller of premium vehicles already this year, Daimler CEO Dieter Zetsche said this week, which would put Mercedes back on top for the first time since 2005.

Mercedes is winning over customers with a recently updated lineup of trendy models that appeal to younger buyers, including the GLC coupe and compact GLA sport utility vehicle.

BMW is responding with a revamp of its 5-Series business sedan to rival Mercedes’s popular E-Class, adding new self-driving features that control speed, help drivers stay in lane and keep distance to nearby cars.

Why does the 5 Series matter, especially at a time when sedan sales are being cannibalized by crossovers and SUVs? Because luxury sedans are still important, more so than non-luxury ones, particularly in China.

The 5-Series, set to hit showrooms in February, will range from a four-cylinder hybrid plug-in that can drive 45 kilometers on a single charge, to a more powerful eight-cylinder gasoline version, BMW said in a statement on Thursday.

The car is critical for BMW after an overhaul of its top-of-the-line 7-Series sedan received a muted response.


As the story notes BMW has downplayed the need to be the No. 1 seller, in favor of focusing on profitability.

2nd Gear: Here’s What’s Going On With The Tesla And Solar City Merger

Here’s what’s going on with the Tesla and Solar City merger. Via Automotive News:

Musk’s deep involvement with both companies has led to some investor unrest and lawsuits from seven different stockholders. Other shareholders questioned the business logic of the plan because SolarCity and Tesla are both burning cash while trying to fund future growth in nascent businesses. In a filing Tuesday, Tesla said that it will no longer need to raise capital in the fourth quarter and possibly not in the first quarter even if the merger is approved.

Musk has said his plan is for the new Tesla, which is funding development of its Model 3 mass-market electric car and the Gigafactory battery facility, is to give consumers a one-stop shop for solar energy generation, home battery storage and a way to charge their electric car.

The companies’ filing said, in addition to the vote date, that Tesla is paying out $441 million to holders of its 2018 senior convertible notes and has another $205 million outstanding. The company expects to pay the $441 million in the third and fourth quarters, according to the filing.


The merger vote, held by shareholders of both companies, happens Nov. 17. Tesla says it will release more information, including something about an undisclosed solar roof product, at the end of October.

3rd Gear: Volkswagen Rolls The Dice On Electricity

Volkswagen’s big plan to move past Dieselgate is to become an electric and hybrid car giant. That goal is commendable, and smartly forward-thinking; these kinds of vehicles are unquestionably the future.


Problem is, no one has made them profitable yet—not even Tesla. Sales aren’t where they need to be at all. Bloomberg spoke to analysts who warn that if VW is to transition in that direction, it’s something that could take until the end of the 2020s, and won’t be profitable for some time:

VW expects its strategy will lift its operating return on sales as much as a third over the next eight years. But will it? Morgan Stanley analyst Harald Hendrikse fears selling lots of electric vehicles could instead cause VW’s carmaking unit to become lossmaking by 2025. It would return to profit at the end of that decade.

Long-term profit predictions are always imprecise, as Hendrikse acknowledges. They’re particularly difficult for electric vehicles because of the uncertainty around technology costs, regulation, competition and demand.

Tesla still loses money. Fiat Chrysler CEO Sergio Marchionne begged customers not to buy Fiat’s 500e electric car because it was so heavily loss-making. While most carmakers don’t disclose financial data for their electric programs, it’s reasonable to assume nobody has yet made money from them.

Investors are nervous about the near-term transition to electric vehicles, hence why carmakers trade at such low multiples of future earnings. They’re right to be especially nervous about VW because its plans are so ambitious — most rivals haven’t set a long-term sales target for battery vehicles.


There’s also the tremendous R&D costs necessary to make such a move. That report is worth a read in full.

4th Gear: As VW Prepares To Make Cuts

There’s another way VW will cut costs to pivot in that direction: slashing its workforce by some 25,000 people over the next 10 years as older workers start to retire, Reuters reports:

The German group’s top executives have been in talks with works council leaders representing VW staff since June in an attempt to agree cost savings to fund the carmaker’s post-dieselgate shift to electric vehicles.

Volkswagen is under pressure to make cuts at high-cost operations in Germany to fund this transformation, while still grappling with billions in costs for its emissions scandal.

Waiting for staff to retire is a more attractive option for VW workers than actual layoffs.

“We have the huge benefit of the baby boomer age groups,” VW labour boss Bernd Osterloh told Handelsblatt on Wednesday in remarks confirmed by the works council. “That’s why we can also say the jobs of VW workers are safe.”


5th Gear: Toyota And Suzuki May Team Up

Historically, Toyota hasn’t been particularly great at partnerships. That’s changing lately, with team-ups with Mazda and Subaru. Add Suzuki to that list. The two are considering some kind of “capital alliance”, Bloomberg reports:

Toyota Motor Corp. sees the technological revolution shaking up the auto industry as a serious enough threat to its survival that the world’s most valuable carmaker will consider partnering with one of its fiercest Japanese rivals.

In exploring collaboration between Toyota and Suzuki Motor Corp., chieftains Akio Toyoda and Osamu Suzuki seek to tie together companies with a history of failed alliances. The two would overlook Toyota’s short-lived partnership with Tesla Motors Inc. and Suzuki’s acrimonious breakup with Volkswagen AG due to the daunting financial demands of keeping up with technological advances in areas such as electrification and autonomous driving.

“Toyota is not really good at creating alliances” and in the past was “fixated on the need to be able to cover all of our own bases,” Toyoda, 60, said at a press conference Wednesday in Tokyo. “However, as the surrounding environment is changing drastically, we need to have capability to respond to changes in order to survive.”


Suzuki’s presence in the U.S. may be tremendously diminished, but it’s huge in other markets. Can I just ask now for a GSX-R-powered Prius? I’ll put in a request for that. Thank you.


Reverse: Just As Long As It Doesn’t Travel Too Fast


Neutral: How To Make EVs Profitable?

I don’t think many people will deny that electrification is the future. But how do automakers make money off of it in the near term?

Editor-in-Chief at Jalopnik. 2002 Toyota 4Runner.



Luxury war? How about a quality war?