VWAPY - BMW: Questions Abound Regarding Fuel Efficiency And Emissions From Series 3 PHEVs

Summary

• A recent European report, including a BMW Series3 PHEV, disputes PHEV's CO2 emissions and fuel efficiency. Calls for PHEV regulations to be based on reality, not myths.
• Some aspects of emissions and fuel efficiency data might mislead BMW Series 3 and upcoming Series 5 PHEV purchasers.
• Thirty global companies petition the European Commission to require all corporate cars and vans to be electric by 2030. Six out of 10 cars sold in Europe are company cars.
• BMW is making a lot of progress on full electrification of its portfolio but how it positions hybrids is questionable.

Traditional auto makers are challenged by needing to rephrase their focus as the BEV revolution comes fast. This is no more evident than at BMW (BMWYY) which has in the past has been deeply focused on its engine technology. A recent article from JP Research catalogued the impressive steps made recently by BMW in its electrification switch. However a bigger view of BMW suggests that the company still has work to do. The problem is not limited to German car makers. The Japanese car industry (notably Toyota ( TM )) is in worse shape in coping with the BEV switch, while US legacy ICE car makers (Ford ( F ), General Motors ( GM )) seem to be more aggressive. Here I update on how BMW reports its emissions and fuel efficiency for its Series 3 PHEV models and how big companies in Europe are pressuring the European Commission to act to mandate full electrification.

BMW myths about its PHEV CO2 emissions and fuel efficiency

Given that BMW more than doubled (up 107.7%) its production of fully electric vehicles in 2022, it's puzzling as to why the company would - as some suggest - obfuscate about its PHEV vehicles that contain an ICE (Internal Combustion Engine). BMW has now sold more than 500,000 fully electric vehicles and in Q4 2022 it sold substantially more BEVs (87,560, up 98%) than PHEVs (62,951, up 20%).

So why does BMW provide hard-to-believe fuel consumption and CO2 emissions data in advertising its PHEV vehicles? A recent detailed report by European clean transport group Transport & Environment shows that information concerning (ICE-containing) PHEV vehicles does not reflect reality.

The report includes 3 PHEV vehicles, BMW Series 3, Peugeot 308 ( OTCPK:PEUGF ) and Renault Megane ( OTCPK:RNSDF ).

The BMW Series 3 PHEV performed below the claimed specifications in terms of CO2 emissions (36g/km official WLTP versus 112g/km actual commuter route). Even using BMW's "anticipatory mode" which requires sat nav program specification resulted in CO2 emissions of 67g/km.

The BMW series 3 PHEV emitted more than 5x the advertised CO2 emissions when powered by the ICE during city driving (204g/km vs. advertised WLTP 36g/km). This is relevant because studies show that many PHEVs (especially company cars) are rarely, if ever, charged.

The range of the BMW PHEV battery in city driving was significantly less than the official WLTP figures (41.2 km real world city driving versus 56km official WLTP range).

The report argues that PHEVs don't necessarily behave as advertised, as in city tests the BMW Series 3 PHEV in geo-fencing mode still activated the engine (twice). Moreover outside of geo-fenced zones the tests showed that the BMW might have been conserving the battery in case it entered a geo-fenced zone. This would mean increased emissions outside of geo-fenced zones.

The report argues that it's almost impossible for cities with zero-emissions zones to maintain the integrity of their zoning if PHEV vehicles are allowed, because it's almost impossible to monitor a PHEV activating its ICE for short bursts.

The report makes seven key recommendations:

i) PHEVs should not be treated as zero emissions vehicles even if they have geo-fencing capability

ii) Tax benefits of PHEV ownership should be based on real world emissions reductions

iii) Privately-owned PHEVs should not get purchase subsidies

iv) Company PHEVs shouldn't get purchase subsidies

v) PHEV CO2 emissions should be regularly updated with real world data

vi) Carmakers should not be able to allow PHEV batteries to be charged by the ICE

vii) Carmakers should educate and reward PHEV drivers for driving electrically ( I'm not sure what this recommendation means)

A key outcome of the report from Transport & Environment must surely be a reassessment of how the WLTP testing is done as WLTP (Worldwide Harmonised Light Vehicle Test Procedure) was developed by the European Union to provide a more realistic measure of vehicle fuel consumption and vehicle emissions.

BMW hasn't engaged in the discussion

The above report has been widely canvassed all around the world, but I have not found a response from BMW. Indeed on its own website BMW seems to be doubling down with hard to comprehend claims about its latest PHEV the BMW X5 xDrive50e .

Under a section on specifications the petrol consumption is described as: " Petrol consumption, combined : 1.1 - 0.8 l/100km (256.8-353.1 mpg). " The CO2 emissions are described as 26-18g/km in the WLTP cycle. These are brave statements that might be hard to demonstrate in real world conditions, especially when in the fine print it looks like the engine is engaged above 80km/h. The BMW X5 xDrive50e does have a large (for a hybrid) battery of 25.7kWh (which has up to 40 miles electric driving range) but it also has a 3 liter 6-cylinder in-line petrol engine. It has a powerful electric motor to provide temporary boost effect. This seems to be to give the car added power and surely this must use a lot of the battery for the kind of use it is put to. The BMW X5 xDrive50e accelerates from rest to 100km/h in 4.8 seconds.

All of the above suggests that BMW is hoping to tough out the report about real performance as opposed to performance under very specific conditions that are not replicated in normal driving.

Public opinion is a powerful driver. Currently a large number of car owners believe that a hybrid is more appropriate for their driving habits than is a BEV. I'm sure this results from a lot of marketing efforts by major car makers (especially BMW and Japanese car companies, especially Toyota). The data that the Transport and Environment report presents is challenging because it clearly conflicts with the stuff that is in the brochures (as described above for the BMW X5 xDrive50e).

While the Transport & Environment report is less damaging than the findings about Volkswagen's ( OTCPK:VWAGY ) manipulation of diesel emissions , I suggest that not addressing the PHEV story has some risks for BMW. I can see why BMW prefers to hope it will go away because the company still makes a lot of cars with an ICE, but the end is coming.

A personal perspective is my recent experience of acquiring a BYD Atto 3 BEV. I'm a bit astonished at the number of people who, having seen and enjoyed a ride in the BYD, have quickly changed their view about hybrids. Simply put, all of the promotions about difficulties with BEVs in charging, range anxiety, fuel savings are shown as being far from lived experience. My fuel cost in driving to, around and from Sydney (~300km) is either nothing if I charge the car during daytime (from solar PV) or to fully charge the vehicle at night using offpeak power. The cost of the trip in my old Lexus IS250 is ~. And I get home with ~150km still in the battery (so no need for charging enroute). To make it clearer, my BYD Atto 3 cost me substantially less than a Toyota RAV4, which is a comparable vehicle.

Big companies petition the European Commission concerning electrification of transport

This week 30 major companies (including Coca Cola, Ikea, Uber, SAP, AstraZeneca, Unilever) sent an open letter to the European Commission concerning the Greening Corporate Fleets Initiative requesting binding targets (by October 2023 at the latest) that all new cars and vans be electric by 2030. The background to this letter is that wheeled transport is the largest source of greenhouse gas emissions in Europe, six out of 10 cars sold in Europe are company cars and they drive twice as much as private cars. Company cars enter the second hand market after 3-5 years. PHEV vehicles keep the ICE alive and they're almost as harmful as a conventional ICE vehicle. The letter also addresses the need for rapid expansion of charging infrastructure.

It isn't just BMW, Toyota is a big hybrid/PHEV promoter

It's a surreal time as I see evidence of misinformation about vehicles with an ICE (hybrids/PHEV) constantly. Anna Krajinska, Vehicle Emissions Manager at Transport & Environment, summarized it well as follows: "Plug-in hybrids are sold as the perfect combination of a battery for all your local needs and an engine for long distances. But real-world testing shows this is a myth. In city tests, just one of three PHEVs tested has the electric range advertised, while all three emit more than claimed in commuter driving. Lawmakers should treat PHEVs based on their actual emissions."

Toyota is yet to accept the end of the ICE and it positions hybrids on its Australian website as follows: " Toyota Hybrid Electric Vehicles combine the power of petrol engines and the fuel savings of electric motors to give you lower emissions without waiting for the battery to be charged. Twenty years ago we set the standard with the Prius. Today we're still leading the way with our Toyota hybrid electric technology, helping to build a cleaner, greener future for all Australians."

Some of the positions taken by Toyota are very hard to make sense of. For example on release of the latest Prius, it was claimed that the hybrid opened up …. " a viable alternative to diesel and gasoline"…. go figure…. last time I looked a hybrid is a gasoline car with a rather small battery and fuel consumption not a lot different from a normal ICE car.

Conclusion

Thirty major companies operating in Europe have made clear that there's an urgency about decarbonizing and that PHEVs are unacceptable as they have a substantial ICE with resulting unacceptable emissions. In the report discussed in this article, the BMW Series 3 PHEV performs substantially worse than the figures suggest that it does. This is unhelpful for customers wishing to be conscious of the need to decarbonize. BMW is a legacy car maker with a proud tradition concerning its fine ICE (Internal Combustion Engines), but it needs to address its ICE past. Failure to do so is a warning signal for investors that there's a way to go before BMW finally accepts that the ICE era is ending.

I'm not a financial advisor, but I observe closely the increasingly rapid electrification of transport. I hope that my comments about BMW's PHEV programs help you as you assess possible investment in BMW.

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