BMW Launches First Mass-Production Electric Car

BMW Launches First Mass-Production Electric Car

BMW AG BMW.XE -0.38% Chief Executive Norbert Reithofer formally unveiled Monday the German auto maker's first mass-production electric car and said his company would need to boost sales of plug-in and battery electric vehicles dramatically by 2025 to meet regulatory requirements.

The BMW i3 is expected to go on sale in the U.S. in the second quarter of 2014. It will be priced in the U.S. at $41,350 before federal tax breaks and other incentives. An optional "range extender"—a small gasoline motor—will likely boost the price tag to $45,000.

Mr. Reithofer, in an interview Sunday evening, said he is taking a long view on the potential of electric vehicles.

"If you build such a car…you have to look into the future, 10, 15, 20 years," Mr. Reithofer said. "If you look around the world, [at] the emissions regulations, in the United States, in the European Union, even in China…cars like the BMW i3 are a must."

To comply with government emissions mandates, which in some territories require auto makers to achieve a certain percentage of sales from electric vehicles, Mr. Reithofer said "we need about 30% plug-in hybrids and battery electric vehicles for the year 2025."

The i3, which starts at €34,950 in Germany, could lose €197 million a year on an operating basis, according to Thomas Besson, an analyst at French brokerage firm Kepler Cheuvreux.

Ian Robertson, BMW's global sales and marketing chief, said in London Monday the company "would be profitable from day one on each vehicle it made." He declined to give details.

Either way the car will earn emissions credits for BMW in markets such as California, reducing the likelihood that BMW will have to pay fines for failing to comply with carbon dioxide restrictions and giving the company more headroom under those rules to keep selling its more profitable internal combustion ranges.

Mr. Reithofer has increased BMW's spending on new technology and new model development, boosting capital spending in 2012 by nearly 42% and research and development spending by 17%. Earlier this year he told shareholders he intended to further increase spending on new technology in 2013. BMW has already dedicated a factory in Leipzig to production of the i3 and potential future plug-in models.

Mr. Reithofer said he is "confident" that BMW can sustain growth in overall sales volumes in the second half of 2013, despite challenging market conditions in Europe. The BMW i3 won't contribute much to this year's sales figures because the car won't start hitting showrooms in volume until early 2014.

Other luxury brands are planning electric models.

Daimler AG's Mercedes-Benz brand plans to launch an electric version of its B-Class compact next year, and General Motors Co.'s GM -0.57% Cadillac brand plans a plug-in hybrid model based on the technology in the Chevrolet Volt. Although the head of Volkswagen AG's Audi brand said it may delay launching plug-in models until better battery technology is developed.

BMW's immediate rival in the plug-in luxury segment, particularly in the U.S. market, is Tesla Motors Inc. The Tesla Model S luxury sedan has up to 265 miles of driving range. The Model S starts at $69,900 before tax breaks.

Mr. Reithofer said the i3 is one of two "bookmarks" in the company's initial plug-in model strategy. After the i3 goes on sale in the first half of 2014, the company plans to launch a model called the i8. Prototypes of the i8 indicate the car will be more directly competitive with the Tesla Model S.

Mr. Reithofer is cautious when asked if BMW plans a larger family of battery electric models. The i3 and i8 are a "good start," he said. "We'll look now into the year 2014 and '15 and then we will make decisions."

The BMW i3 was designed to be a lightweight, battery electric vehicle. The substructure of the passenger compartment is made from carbon fiber and the chassis is aluminum. BMW says it will offer fast charging capability as an option, allowing i3 owners to regain up to 80% of charge in as little as 20 minutes.

With electric vehicles, says Mr. Reithofer, "you need range. And if you use lightweight construction range will be better." BMW officials say driving the i3 should convince prospective buyers that it is a better quality car than other lower-cost electrics.

BMW says the i3 will deliver 80 to 100 miles of driving between charges. The Fiat SpA's Fiat 500e, which starts at $32,600 before tax breaks, has a range of 87 miles. Nissan Motor Co.'s Leaf, which starts at just under $30,000, can go 75 miles, according to the Environmental Protection Agency's measures. General Motors Co.'s Chevrolet Volt can travel 38 miles on electricity, and 380 total once the gasoline engine kicks in.

Write to Joseph B. White at joseph.white@wsj.com

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