BMW shifts focus towards harnessing technology

Wed Mar 16, 2016 7:52am EDT
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MUNICH (Reuters) - German carmaker BMW (BMWG.DE: Quote) said it will focus on electric vehicles and automated driving and develop its software and technology services as part of a new strategy for the 100-year-old carmaker.

The emergence of rivals including ride-sharing company Uber [UBER.UL] and technology group Alphabet (GOOGL.O: Quote) which has developed its own self-driving car, has prompted BMW to rethink its traditional strategy of selling large powerful luxury cars.

"We are leading BMW Group into a new era," Chief Executive Harald Krueger told journalists at BMW's annual results news conference.

"To this end we leverage innovative technologies, comprehensive connectivity and zero-emission mobility. All of these need to be industrialized, bearing in mind our business responsibilities, and in a sustainable manner, which in itself is another great challenge," he added.

BMW Group aims to achieve a pretax margin of at least 10 percent from 2017 to 2020 by pushing digital connectivity, autonomous cars and developing businesses including motorcycles and financial services.

Analysts at Evercore ISI welcomed the new strategy. "BMW, in our view, can stay in the top of automotive innovation leaders and outgrow global vehicle demand by spending 10 to 12 percent of its revenues in R&D and capex," Evercore said in a note.

Shares in BMW rose 4.6 percent to 83.21 euros by 1145 GMT, outperforming a 2.1 percent rise by the STOXX Europe automobiles index .

New technologies have created opportunities for the automotive industry, forcing the Bavarian carmaker to evolve its business beyond mechanical engineering towards becoming a software and technology company.

"The value creation is shifting from the actual hardware toward software and services," Krueger said.   Continued...

A vintage wheelcap of a BMW is picturesd before a news conference marking the company's 100th birthday festivities in Munich, southern Germany March 7, 2016.     REUTERS/Michael Dalder