The Dow Jones Sustainability Index is the most influential stock index for sustainability-driven companies worldwide, and the award confirms that, since 2005, the BMW Group has been the world‘s most sustainable premium automobile manufacturer. We have the inside story from the boss of BMW in South Africa (SA).
Reinventing mobility with sustainability in mind takes more than just a vision. You need answers to a plethora of emerging questions, the first of which is: Where does sustainability begin? The answer: In exactly the same place in which it ends.
Sustainability characterises the thoughts and actions of the BMW Group from floor level to the boardroom. The Group uses a wealth of innovative technologies and goes even further: From design to production; from the useful life of the vehicle to its disposal, every detail is based on sustainability, which is an attitude that doesn’t have a beginning or an end.
To find out more about this dynamic company, Gregory Simpson sat down with knowledgeable managing director of BMW SA, Tim Abbott, for more on the energy efficiency principles that have made BMW a leader in sustainability.
The 58-year-old, who is married with three children, was previously the managing director of BMW Group UK, a post he has held since February 2009, and educated at Loughborough University. He has a keen interest in motor sport and golf and a broad experience of the motor industry, spanning both manufacturer and retail environments.
He first joined BMW in 1986 and held several positions in the regional and then national sales teams. In 1996, Abbott left BMW to further his career but rejoined BMW Group UK as sales director in 2006.
You came to South Africa with a lot of experience running BMW in the UK, what lessons did you bring in, and what have you learned while you’ve been in the country?
The lessons I brought here were about having a good balanced network, and that’s a mixture of entrepreneurs, small provincial dealer groups and then what we call larger groups like Imperial. You need that balance because the economy is changing all the time, so we had that model in the UK, and we’re developing that model here as well. Finance in the UK is very developed and that’s something that’s becoming developed here as well, so we do more car financing that we did probably five years ago and we will continue to do that as well. It’s still lagging behind Europe, solar power, I mean on a beautiful day like today why are we not using more solar panels, solar ports, car ports to run vehicles, so that’s something which I will be championing over the years. We actually have a joint memorandum with Nissan where we’re putting a charter infrastructure in place.
What have I learnt? I’ve learnt that it doesn’t matter how tough things are you can still fight, and South Africans have a wonderful opportunity to find solutions to the problem. In Europe we give up very easily, I mean if we had the problems I assure you the industry would just fold. Here we get on with it, if our dealerships don’t have any power but they continue to service cars, sell cars, and it’s that resilience which I really admire the South Africans for.
If we look at the Rosslyn plant, with bio gas on site and other developments therein – is this putting the power in your hands so to speak?
Eskom didn’t drive that decision but it probably helped it on the way as well. Out of all the projects we do around the world this is the one where we need it most, so 30% is through the bio to watt programme, and the 4.4 megawatt developments, using cow dung. We’ve been up there to see the farm and it’s just amazing to see what they’ve created, but if we go from 30% to 50% in the short term that would be a great success for the plant. It gives us stability, it gives a bit of leverage as well going forward, but could we get to 100%? Yes, we could. It’s no good if we don’t have any power but our wheel supplier does, you can’t deliver a car without wheels, so we need everybody in the supply chain from tier 1 to tier 3 supplies to get power and if it that doesn’t happen then we’ll stop.
What sort of time frame are you looking at for 100% off the grid?
We put a time frame on to say we could do it by 2020, I’m not sure whether we can or not but it’s a good target figure, it’s the same whether we get there or not but if we could just progress in increments and keep going forward. When the buyer for that project talked to the owner they felt that it could go to 50% very quickly —but could he do more? That would mean more investment, so that’s another discussion that would probably need another string of supplies to come into the plant.
If you look where Rosslyn is, there’s a landfill site close by so again the City of Tshwane is keen to talk to us so that we could we do more work with those guys. They are literally on our doorstep, so we could produce more power than we need—that’s an option as well, so these are ongoing discussions we’re having at the moment. I see it as—100% would be our dream, 120% would give something back to the grid and would be even better, but we will wait, a step at the time.
Please explain about the global strategy for green production from that perspective?
Obviously sustainability in BMW is why we have been on top of the sustainability index for the last seven years. We won that because it isn’t just about the production side, but if you take that as a first step, and look at i3 production, it comes out of carbon fibre and reinforced plastic. The carbon fibre is made in America, that plant is driven by hydro power. So every ounce of electricity going in there is from water power. The car then, that part goes to the plant which has four huge wind turbines that provide the power to build the car, so that’s i3 and i8, so no reliance at all on the grid whatsoever.
In terms of the products we use, in terms of the finishes they use, this is core to BMW. Our office in Midrand is a five star green building, so we’re using new technology around air conditioning, to get the cost down basically, that’s around lighting, it’s around heating, it’s around cooling and it’s a wonderful environment to work in.
Has sustainability always been a core value of BMW?
Everything we do we try to do in a very transparent open way. We try to say—how can we help the environment, so when we build new plants, if you look at the Rolls Royce plant in England, it’s built into a hillside, if you came from one direction you wouldn’t even know the plant was there, because it’s actually covered in grass over the roof of the building, it’s incredible. So it comes from the top, it comes from the management; every board member sits on the sustainability committee. We’re one of the only companies in the world where that happens. People have a sustainability officer, but not every board member, so you imagine every month the board sit down and discuss ‘what is our strategy’, where are we going to go, what we can do to support the environment.
Can you talk a bit about the new development; you mentioned hybrid cars and new fuels?
BMW was one of the first companies to embrace, what they call a lightweight structure and electric power, but in a newly built vehicle. I was very lucky; back in 2007 I went to this very secret area of Munich where the decision was made to make the hybrids. Build a completely sustainable electric car from the ground up – so they would take a Mini or a One Series and convert it into electric power. So forget traditional steel, it’s too heavy, steel is 50% heavier than carbon fibre, it’s 30% heavier than aluminium, so straightaway the decision was taken that the car needs to be carbon fibre and that was made back in 2007.
BMW went out straightaway and bought SGL, a company in America to provide the carbon fibre for these vehicles and then it was a decision in terms of what can we build that’s going to give customers what they want. Back in ‘2007/2008 the range was a big concern. If you map what’s happened to mobile phones it’s the same thing, we all had one years ago the size of a television set, and now today it’s the size of smart phone. We are in that phase at the moment, so we came in very early, and I was involved in the electric programme in the UK where we took Mini’s and the whole rear seat of the car was a battery. I mean, the thing gets quite hot I assure you, but it was to test whether these things would work.
We tested it on 50 couples who lived in and around London and every single one of them wanted to keep the car within the programme. So they bought into electric, they said this really works for us, so we knew we were on the track. But then it was a question of matching a very lean, efficient, small engine, like a motor cycle engine to the car, and that’s what we have with the I3 in fact, it’s a range extender, to take away ranger anxiety. The batch it will give us is about a 100 kms range, depending on weather conditions.
The I8 had a three cylinder engine, matched to the electric motors and that gives us a 200/300 km range on the vehicle. To me it overcomes all the ranger anxiety issues, so that’s all where the programme started, but then today we’re looking at a plug-in hybrid on main stream vehicles. The X5, which was just introduced to SA, the new 740E will come with a plug-in hybrid, and the three series will come with that as well. In the next five years BMW, across the whole range, will virtually offer electro mobility on every model, and that includes the Mini as well by the way.
Battery development has been another big talking point?
If you look at BMW, we looked at the electric motor, we looked at teaming up with big companies like Bosch, but in the end we decided actually it’s our technology, we can do it; we’re probably better ourselves for the car industry. The battery technology is slightly different, so we’re having to match up with the Samsungs as well but they have the technology and of course every year they will get more capacity out of the battery, it will be lighter, it will be smaller, so the car design, if you look at the I3 it’s the base platform, its where the battery sits, but eventually that will get smaller, there’s no question about it, as the power gets higher.
Would you say innovation is what separates BMW from the pack?
If you think of the ‘i brand’ we did that when the world was in recession, everybody else packed their bags and said let’s just stay where we are. We spent two billion euro’s developing the i brand back in 2007/2008, it’s was a very, very brave decision, but it’s part of our strategy number one, which is about future mobility, future connectivity. It isn’t just about the car; it’s about what you do in the car. The new Seven series is evidence of that, so you’ve got a luxurious product that also delivers, it’s like an office environment in the back of the car, it is the first class seat of Lufthansa. We actually had the CEO of Lufthansa with us last week, he said this is identical to a first class seat, and he said actually you’ve got more technology to offer to your customer than we have first class and we’ve got to learn something from you. So yes innovation, technology is what makes us stand out from the pack.
What are your targets for the next three years for the i series?
Well worldwide we said by 2020 electric cars will be about 3 or 4% of the total volume, that’s now starting to accelerate, people are beginning to understand electric, so we haven’t set a time, we said let’s see what the demand is. We build to demand, but as people get to understand electric cars it will become more prevalent. And often it’s around government as well – they need to say okay we need a charging infrastructure, we need to support that, you need all parties.
We’re just trying to say to the government in SA that it’s not about incentives, okay they have got the taxation wrong on the car I believe, its taxed at 25%, the next five is taxed at 18%, so where’s the logic? They admit it’s wrong but it takes time, but if you look at the successful countries like Norway where today 50% of all vehicles being sold are electric, why? They get incentives. They also get the chance to drive down dedicates lanes, bus lanes, they get dedicated parking in Oslo so as a consumer you’re saying okay it’s cheap to run, I get to work quicker, I get parking easier, I get an incentive to buy the car, why not? So, therefore, 50% of vehicles are electric. But that collaboration means you see change, and I wouldn’t be surprised if similar to Beijing, I was there recently, you’ve got eight lane highways, the day I was there you couldn’t leave the office because the air quality was so poor. That can’t be sustainable, eventually somebody has got to say enough is enough, and have the strength to introduce changes, and electric is probably the quickest way of doing it.
Talking about China, German luxury cars are a big hit over there?
Yes, they are but it’s not just German, any luxury brand, so whether its Prada handbags, whether it’s Samsung, Apple, BMW, Mercedes or Audi they all resonate highly there, they’re well thought of, they’re well built cars. The Chinese are very good at imitating, they’re coming, and the day will come when we will have more Chinese brands in SA, it’s coming quickly, and they’re building very, very good cars today.
CO2 reductions as we move forward, that’s another big talking point?
If you look over the last five years BMW reduced our CO2 by about 25%, and it isn’t just through engine output either, it’s about low friction wheels, the way we have air ducting in the car, the aerodynamics of the vehicle, so all that is called efficient dynamics, we packaged it all together to get a reduction. There’s only so much you can do with an engine and we’ve made a big stride so now it’s the 1% we are aiming for. However, what’s happened over the last few months is going to make us all look at our CO2. We’re all working very hard and as an industry we have done an incredible job so far, with even stiffer objectives from governments, especially in the States, and probably in China and in Europe. It’s inevitable that as we continue, development costs will be very high. This will mean the car in the street will need to keep on selling a certain number of vehicles, for that reinvestment, but it’s there, the capability is there but it won’t be the strides we’ve had over the last five years.
Is hydrogen a viable long term fuel solution?
Hydrogen is definitely being talked about a lot, and again it will accelerate in terms of this development, so people will say actually we do need alternative fuels—is the electric car the Panacea? No it’s not so therefore hydrogen has to come into play and probably hydrogen is the long term solution. BMW had a seven series hydrogen vehicle, five, six years ago, and obviously the biggest issue is storing hydrogen so you can put it into a tank in the car and the car can be constructed. The seven series actually has a tank in the boot, so it didn’t take up a lot of space, but you could build it into the frame of the vehicle. Another issue is producing hydrogen, so again this whole weighing up of what it costs in terms of power to produce the hydrogen to drive the car, but that is the ultimate solution, it’s hydrogen, not a waste product, it’s water. So again for the environment it is absolutely carbon neutral, so it’s got to be the ultimate solution.
How far are we away from fully autonomous driving?
Well the first steps will probably be announced in under a year and autonomous driving means efficiency of driving, because constantly going 100kph in a controlled way without stop starting, that’s got to be good news.
That’s the next stage, autonomous parking and all that is there today in all our cars or will be over the next few years. But it’s about legislation, what will they allow us to do on the roads; if you look at every highway there’s a level above the highway so why can’t you have highways going both ways—instead of it going this way why don’t they go that way.
Fuel supply in SA is another hot topic, especially when one looks at diesel quality and how that hinders manufacturers introducing the latest technology?
The biggest issue in SA about fuel is fuel quality, so that’s something we have to work with the oil companies to make sure the quality is there, because we are having to run combinations of engines here which accommodate the weakness of the fuel. We want to use X-type engines but it needs a certain type of quality fuel, so again there’s an industry through NAMSA which is all the OEM’s, we are working very hard with the petroleum industry to make sure we get clean fuel, because without consistently clean fuel we will have problems.
How does the rand devaluation effect you operations in SA?
It fell so dramatically I don’t think any of us were ready for that, and of course the .5% interest rate increase as well, so it’s all conspiring against us. The bottom line is we have to look at the rates and we have to decide on how we’re going to price our cars, it’s not just facing our industry, it’s across every industry, so you can’t operate in a negative situation.
We just have to do the calculations to decide where the rand will be in the short or media term, so you can’t make an immediate decision; you’ve got to look further forward than that. The rand will stabilise, it will get stronger again and we will make decisions as at when that happens. But a weak rand is not good news, it helps the plant because if we produce locally then the components are cheaper, so export is good and export record volumes at the moment out of SA for all car brands are good, so this is a good place to do business.
And finally, do you plan to increase the manufacturing base here?
Well our first plan is to change to X3 production in around 2018, to the new generation car.
