Mercedes-Benz, BMW and Audi are commonly referred to as BBA in chit-chat in China.
In 2020 and 2021, Mercedes-Benz, BMW and Audi all laid out their electrification strategies, making it clear that they are moving away from petrol to electric vehicles. This shift is essential in China, the most critical market for the three German luxury carmakers. Last year, BMW came in first among the three automakers by sales volume, selling 46,675 EVs in China. However, BMW's sales pale in comparison to market leaders like Tesla and Nio. BBA as a group has yet to succeed on the same scale as Tesla and their Chinese counterparts in the new energy market, and they are struggling to catch up. At the same time, BBA faces significant risk because China's NEV market is the most competitive globally.
Pivot to electricity
China is an important market for Mercedes-Benz, BMW and Audi to execute their electrification strategies. According to its mission statement, BMW plans to generate around half of its sales from fully electric cars. Audi's corporate strategy is called "Vorsprung 2030," whereby the automaker aims to speed up electric transformation originally slated for 2026. Furthermore, Audi will continue to phase out internal combustion engine (ICE) vehicle production, even setting a date for this to happen in 2033. Mercedes-Benz's electrification scheme was upgraded recently. A company official said its strategy would be a shift from "electric first" to "full electric." The goal is to provide pure electric models for all market segments in 2022. In 2025, the sales of pure electric and plug-in hybrid models will have accounted for 50% of the company's revenue, according to Mercedes-Benz's blueprint. It plans to sell only pure electric models in 2030.
The EV story of Mercedes-Benz, BMW and Audi in China will come to light more clearly if we shine a spotlight on their models and sales. According to China Automobile Dealers Association, Mercedes-Benz ranked second and sold 11,435 new energy vehicles, including the models EQC, E Class PHEV, EQB and EQA in 2021, with EQC being the best-seller. Audi was placed at third and close to Mercedes-Benz in sales, with 11,603 units sold, including A6L PHEV, Q2 e-tron and e-tron. BMW came at the top, selling more than 46,675 units of its 5 Series PHEV, iX3 and X1 PHEV.
Considering the overall sales of Mercedes-Benz, BMW and Audi in China, NEVs constitute just a tiny portion of their business and thus are less important for them. Altogether BMW sold 815,691 units in 2021, followed by Mercedes-Benz with 758,863 and Audi with 701,289 units.
The proportion of new energy vehicles to all types of cars sold shows that BBA still took a conservative attitude toward the NEV market in the past two years. BMW, which has the highest ratio of NEV sales among the trio, only accounts for 6%. In comparison, Mercedes-Benz and Audi make up 2%, respectively. BMW was the first of the three carmakers to advocate electrification, having launched its all-electric BMW i3 in 2013, and has been the NEV market leader in in Germany.
Notwithstanding these numbers, BBA lags behind leading luxury EV makers in China. The three companies delivered 69,173 NEVs in total, including plug-in hybrids and pure electric vehicles, in 2021. By contrast, in December alone, Tesla sold more than 70,000 electric vehicles, while Nio delivered more than 91,000 units for the whole year, up 109.1% from 2020.
EV pipeline
Mercedez-Benz, BMW and Audi largely move at a consistent pace in the new energy market. The three companies will launch more niche products for the Chinese market over the next two years. More than half of their NEV sales in 2021 went to plug-in hybrid electric vehicles. Nonetheless, they have realized the importance of going "purely electric" and promised to offer pure electric car models for all segments. Mercedes-Benz's products to be unveiled in 2022 include EQS, EQA and EQB based on the company's new Electric Vehicle Architecture (EVA). According to green car reports, a major NEV industry media outlet, in 2025 Mercedes-Benz will launch three new platforms, including the MB.EA platform for medium and large models, the AMG.EA platform for models under its AMG performance arm, and the Van.EA platform for light commercial vehicles. BMW plans to add seven models to its new energy product lineup. In addition to the already disclosed iX3 and iX, BMW will introduce i4, pure electric 3 Series, an unnamed pure electric flagship model, and two plug-in hybrids in China. Audi is rolling out more new energy models as well. Its parent Volkswagen Group is implementing an "all-in electrification" strategy. As its high-end brand, Audi is also accelerating the process.
Among the three, although BMW was the first to enter the EV market, BBA is roughly still at the same starting line when it comes to large-scale advances in electrification. In 2022, BBA will likely combat each other more intensely in the premium market space.
Challenges ahead
For the average Chinese consumer, high-end electric cars from Mercedes-Benz, BMW, Audi may be priced out of reach. Mercedes-Benz and BMW recently disclosed the specifications of EQS, iX40 and iX60. These are ultra-luxury electric cars with official prices starting at CNY 1 million, CNY 750,000 and CNY 1 million, respectively. Sales of electric vehicles in these segments are low. For example, HiPhi, a Shanghai-based upscale electric car producer, prices its flagship model HiPhi X at CNY 570,000 to CNY 800,000. Sales reached 4,237 units in 2021. Normally, the price range of the primary market for high-end passenger vehicles is between CNY 300,000 to CNY 500,000. Besides, the market has proven BMW's pricing strategies wrong. Take BMW iX3, the best-selling EV model of all BBA products, as an example. Its sales jumped after BMW slashed the price by CNY 70,000 to between CNY 380,000 and CNY 420,000 in 2021.
Unlike the fuel-powered car market, where most luxury car sales are generated by BBA, the luxury electric car market is more crowded. With intelligent electrification come differentiated features offered by different players. This helps to level the playing field, at least in the upscale market, where BBA's engineering and branding advantages have been ineffectual. Tesla, Nio, HiPhi and other emerging brands continuously report sales breakthroughs, disrupting people's perception of luxury cars, which until recently was largely dominated by BBA.
So BBA looks in the rear-view mirror and finds more opponents not just catching up fast, but actually overtaking them. The tables have been turned.