BMW Motorrad CEO/President Stephan Schaller Q&AThis is the first in a series of interviews with movers and shakers in the motorycle industry. Alan Cathcart discusses BMW’s Asian connection and future of electric motorcycles with Stephan Schaller, the President/CEO of BMW Motorrad, in Schaller’s office in Munich. — Don Williams, EditorQ: Is a key ingredient in BMW’s record growth that you have successfully expanded your global reach into new markets?
Stephan Schaller: Yes, indeed. So, for example, last year we sold close to 8,000 bikes in Brazil, and this year it will be more than 10,000. Germany was again our number one market, with 21,714 units sold there, but Brazil is after the USA [15,301 units – AC], France, and Italy the fourth biggest export market for us. We have manufactured a couple of parts locally, but the main focus there is on CKD [Complete Knocked Down motorcycles made in Germany for local assembly – AC], and the factory there will grow bigger as we continue to expand there.So, Brazil came first, but one year ago we also started assembling bikes in Thailand. We already had car production there, but since January 2014 we have also started assembling BMW motorbikes—firstly the F 800 models. But this is only the starting point, and we have plans to produce several other different models there for sale in the Southeast Asia region, with the advantages in duties we get from manufacturing in Thailand.Q: Across the water from Thailand, India has significant export potential for Western manufacturers, but is itself already a significant motorcycle producer. BMW has forged an alliance with TVS there. When can we expect to see some products emanating from that alliance – and what kind of bikes will they be?Stephan Schaller: Yes, we searched for a long time to find the right partner in cost- effective manufacturing countries, not only India, and as a result of this search we found TVS. We announced in April 2013 that we will jointly produce several different designs of bikes on the same platform, so we will use local sourcing for components, but the engineering is 100-percent done by BMW.This is a real win-win situation where we have the engineer- ing know-how that the Indian company learns from, and they have the cost base that BMW Motorrad can benefit from glob- ally. Looking at this company, I am 100-percent convinced that TVS is able to do first-class quality. You can eat off the floor of their factory, it is so clean and well ordered. This is first class, not in the technological sense as you find it in BMW factories, but translated to the needs of that region. So it’s a 100-percent suit- able base for us to get really competitive bikes out of, in terms of quality matched to price.Q: So, in India TVS will be producing a dedicated sub- 500cc BMW model range, but those other plants you mentioned are assembling BMWs from CKD kits, which therefore have to be manufactured in Berlin. You are now at the stage of building 130,000 units there annually. Are you going to run out of capacity there?Stephan Schaller: No, we have made a lot of investment in what is a historic factory for BMW, adding lots of different buildings to expand production. This gives us more than sufficient capacity in Berlin to look after the other four locations, especially in terms of manufacturing the more complicated engines built there.Q: So no need to establish another BMW factory within Germany or in another European country to take up the extra demand?Stephan Schaller: We have five, and they are placed in the right regions. Berlin is more than enough at present to satisfy demand in our core Euro- pean market, covering also the USA, our biggest export market.Q: How about China, where you have had an agreement for some time with Loncin to assemble the F 650 engine, without ever developing that alliance. Are you thinking of expanding there?Stephan Schaller: We started eight years ago with Loncin, with a contract first for single-cylinder engine assembly. Doing business with the Chinese is not very easy; it is very important to establish a relationship and, with Loncin, we have now developed such a relationship. We have therefore decided to produce a second engine there, a twin-cylinder middleweight design, which is currently under development. This is a more complicated engine, which will someday fire BMW’s new mid-capacity class models. This is a very good basis for continued expansion of our relation- ship with Loncin.Q: Would you consider having your electric vehicles manufactured by them also, because in China they have a huge electric motorcycle and scooter industry since combustion-engined motorcycles are essentially not allowed in any major cities or on freeways?Stephan Schaller: Yes, and no. Let me answer in principle to China. Besides the Loncin-built products, we export lots of CBUs [Complete Built- up Units, motorcycles made in Germany – AC] into China, and we see the future Chinese motorcycle market behavior following the car market, which has expanded so greatly in the recent past. So, we feel that it’s about to start growing also for big bikes, in which there’s growing interest in China, and I personally believe this will be a very important market for us in the future.However, saying that and being often in China myself, it’s obvious that there is a pollution problem, and it’s only logical that electric mobility will be an issue. We have the only offer in the electric range which is a high performance two-wheeler— basically, our “C evolution” scooter has 11 kilowatts continuous output, peaking at a maximum 35 kilowatts—but the millions of electric small vehicles which you were talking about in China are all below one kilowatt, so this is not the class we are entering.With our scooters, we have a real performance bike and the day will come when legislation could change where, particularly in the big cities of China because of pollution, they will give electric two wheelers the right to use the freeways. Until then, I don’t see sales picking up so much beyond the rich Chinese for whom it’s a toy, which was the case in Germany a while ago.Q: But won’t those rich Chinese also want an exclusive high-end electric two-wheeler to commute on?Stephan Schaller: Not only the Chinese want that! If I could get a GS today with electric drive, I think I would prefer it to the combustion ver- sion. Which vehicle is better suited for electric power than a two-wheeler, where you have maximum torque from the very beginning, and can have a very fine throttle sensitivity? We only have to wait for the batteries to develop further. Therefore, the logical first step is the C evolution delivering urban mobil- ity, because you don’t go more than 100 kilometers [62 miles] in cities.Q: But would not building the C evolution, which seems likely to be the first of many BMW electric two wheelers, in China give you a better chance of reducing the retail price through economy of scale, making it more appealing to customers there who already under- stand the advantages of E-vehicles, as well as those in Europe or the USA where you actually have to do a missionary job on convincing people to give it a try?Stephan Schaller: Firstly, we are totally on target with sales of the C evolution, which is quite expensive, and was always intended to set a foot- print, and then see how the market reacts. As you know, battery development develops quite rapidly in a positive direction, so we have some reasons to think that this is the right strategy.We will indeed homologate this bike in the not too distant future for China. Then we can test the water there and if that testing goes in the direction which you just outlined, then we have partners there to enable us to respond.Making an electric bike is not too complicated once you resolve the problem with the battery, so I could well imagine doing so in the market where we have the biggest demand. If it’s China, I would not be reluctant to do so. But maybe it could also be another country, in which case we are flexible enough to go where the economy of scale gives us the biggest benefit.Q: As you say, the batteries are the big issue with electric vehicles of any kind, and I remember when I discussed this with your predecessor Mr. von Kuenheim about four years ago, he told me that at the moment everyone uses lithium ion batteries. But apparently there is lithium air and even zinc air battery technology under development that gives a much greater capacity and thus range, and that this should become available in about 2022-23 for civilian use. Can you update me on that from BMW’s standpoint?Stephan Schaller: The good thing is that we are traveling in the slipstream of our car division. The cars set the pace, and BMW Motorrad get spin- off technology from them. So, at the moment we use just one of the exact same battery modules found in the BMW i3 car.We are much too small to talk about battery technology with Samsung, or the like ourselves, but the BMW car guys are very strong there, and we know from them the pace of development of battery technology allied with costs. From this we are quite confident that it could be sometime in that range that you mention, in the mid-2020s, that we can expect to have an even balance between the costs and performance of combustion and electric vehicles alike, and then we have a completely different ball game.Q: Is it your ambition for BMW Motorrad to become the reference point amongst Western manufacturers for electric two-wheeled products, as your car division evidently is for cars?Stephan Schaller: Yes, it is my intention that BMW must set the pace in development of this kind of technology on all segments in motorcycles, as in cars. When the time is right, and that means when we have the right battery technology, with a range of 300 to 400 kilometers, I am convinced our industry will change, and we must be leading it.Story from Ultimate MotorCycling magazine; for subscription services, click here.