BMW puts electrification at the heart of its fleet strategy

BMW general manager corporate sales Rob East (in light blue jacket and colour-cordinated shoe trims) shares the delight with his team on collecting four awards

The interview ends with a quip: “How can I beat this year – I’ll have to move to another brand!”

Rob East is joking, of course. Fresh from collecting four Fleet News Awards trophies – taking his tally to 11 in three years – the BMW general manager corporate sales is excited about the future at the premium manufacturer.

BMW is embarking upon a major electric offensive in the UK, which will result in 25 electrified models on sale by the end of 2023 – 13 will be full electric. Coming this year are the i4 and iX SUV, with 5 Series, 7 Series, X1 and Mini Countryman to follow. From 2025, Mini will only launch electric cars.

Huge pent-up demand caused by the industry-wide pause on orders during Covid-disrupted 2020 has coincided with this flood of benefit-in-kind (BIK)- alluring product – although the semiconductor and component shortage has put a slight dampener on progress.

East, though, is typically bullish about BMW’s prospects, pointing to strong corporate demand and a positive reaction to his channel optimisation strategy as reasons for optimism.

The interview

Fleet News: Last year you told us about your plans to further reduce volumes into short-cycle channels such as rental. In the first half of the year, you registered 28% fewer (a drop of 1,271 units), although Q2 was up by 310% (or 966 units) on 2020. How do you rate your progress?

Rob East: We have a clearly defined strategy about optimising our channel mix focusing on the true customer channels rather than the push channels, and it’s been super effective. We’re already seeing residual values (RVs) improve by more than 10%. We have an H1-loaded rental plan, but we will end the year in line with what we predicted – a 50% reduction on last year.

FN: Your rental strategy dovetails neatly with rising corporate demand as companies start to renew their car fleets.

RE: The market is pretty buoyant. Premium fleet is up 33%, we are up 35%, so broadly in line. We’ve seen a return to normality with a lot of our large end-user customers and with leasing companies. People are updating their fleet policies to reflect the much richer mix of PHEV and BEV product – we surveyed recently and 85% of our large customers are reviewing their policies; they all want to talk about electric models. Our order rate is beyond where it was pre-pandemic, especially the run rate for iX3, a great reaction to iX and lots of pent-up demand for i4, which we don’t launch until December.

This year is all about electrification. But we are still seeing solid performance for our plug-in hybrids: 330e continues to be our best-selling fleet model and we don’t see that changing any time soon. And it’s across the channels, including public sector and SME.

Now our focus is on preparing for iX in November and i4 in December. We have positive feedback from the residual guides, and they are very bullish about the RV position.

FN: Is pent-up demand still driving the number of fleet registrations?

RE: A lot of our customers went into contract extensions and a lot of those are now maturing so they are looking to replace. We expect this level of demand to continue for the foreseeable future. We are also seeing people come back into company cars, especially segments where there are structured salary sacrifice schemes. We are working with a number of large end users who have a very clear objective to get cash takers back into company cars.

FN: The latest HRMC figures show another drop in company car drivers. Are you suggesting this might reverse over the next couple of years?

RE: Yes, definitely. There’s no surprise there has been a reduction because, arguably, the BIK regime was becoming ever more draconian, but we also, as an industry, had BIK uncertainty for several years. We are optimistic that we will see growth in the true fleet sector up until at least 2025, particularly in large end users.

FN: The semiconductor shortage has affected every manufacturer; how are you able to mitigate supply issues?

RE: We’ve made individual adjustments to our production programme based on the inconsistent supply of semiconductors; we have flexible global production and worktime approaches. In half-year one, we’ve been able to compensate for the lack of semiconductors – we didn’t cancel our supply which has protected us – but we are realistic, and we will see restrictions for the rest of this year. We’ve been clear and transparent with communication and we hope to see it ease for 2022.

FN: Looking ahead to next year, what are you excited about?

RE: Obviously the new models, not just electric but also PHEV and combustion engine. But also the whole customer engagement element is really important to us.

It’s all about giving them the best possible service which then starts to influence loyalty and retention which, in the corporate market, is very difficult.

FN: How have leasing companies and fleets reacted to your latest customer initiatives which seek to have direct relationships with the driver?

RE: We didn’t rush the pilot scheme, we wanted clear and robust feedback. But it’s been positive. We are delivering to company car drivers what they expect – they select a brand with the mindset of a retail buyer. We did it in partnership with the leasecos – it wasn’t presented as a fait accompli. It was never about cutting across them; it was about enhancing the experience for the driver which also has a positive affect for the leasecos. We think it’s a point of differentiation for us in the marketplace.

FN: In addition to the product, how is BMW helping fleets and drivers to make the transition to electric?

RE: In the research we’ve done, there’s been a shift from range anxiety to charging anxiety. So what we are doing, particularly with products like the BMW Charging card and our BMW charging app which shows local charge points, is make the transition as easy as possible. There is rapid investment in infrastructure, so education is also important.

FN: You’ve also just launched an incentive scheme for PHEV drivers that enables them to earn points for driving on electric then receive vouchers for free charging.

RE: It is controlled via the app and is open to all customers, retail and corporate, who use PHEVs. There are some nice tangible rewards for people who optimise the use of the car on electric. You can earn some fairly substantial charging credits over a relative short space of time. But I think it’s a fallacy that people don’t charge their PHEVs. We talk to our large end-user customers and to have a PHEV, their drivers have to, one, have a charge point at home and, two, prove they are charging it.

Many people have changed their usage profile and they are operating the car almost entirely on electric now their mileage has reduced.

Cars optimise own settings

BMW goes through an extensive handover with customers, explaining the regenerative settings and the benefits of preconditioning the car. However, increasingly, its cars have the intelligence to optimise their own settings for maximum efficiency.

Input the destination into the sat-nav and the car plans the route via data points and makes the decisions on where to regeneratively brake and where to lift off the throttle, such as when approaching a junction.

In addition, if the journey includes a low emission zone, the car will save enough electric for that portion of the trip.

“All this can have a significant impact on range,” says East.

“We’re finding that customers are very knowledgeable – they aren’t selecting these cars on a whim or for BIK purposes.

"They know what they are buying, how to optimise it, where the fast chargers are, they have home charge points and they know the correct energy tariffs.”

The PHEV/BEV line-up

BMW currently offers 17 PHEV models in 95 markets worldwide.

In the UK, they are: 225xe; 330e; 330e Touring; 530e; 530e Touring; 545e; X1 xDrive25e; X2 xDrive 25e; X3 xDrive30e; X5 xDrive45e; 745e/Le/Le xDrive; Mini Cooper S E Countryman ALL4

Outside the UK: 320e; 320e Touring; 520e; 545e Touring; X1 xDrive25Le (China only)

The company also has three BEV models in the UK: the i3, iX3 and Mini Electric, with the i4 and MW iX due to launch before the end of this year followed by BMW 7 Series, BMW 5 Series and BMW X1. By 2023, there will be at least 13 BEV base models.