BMW Launches Its First Mass-Production Electric Car

Updated July 29, 2013, 10:18 p.m. ET

BMW Launches Its First Mass-Production Electric Car

Auto Maker Needs to Boost Sales of Electric Cars to Meet Regulatory Requirements

JOSEPH B. WHITE

BMW unveiled Monday its first mass-production electric car, the i3. The German car maker says the car can accelerate from 0-60 miles an hour in just over seven seconds and says the basic model has a range of 100 miles. The new i3 is expected to be priced at $41,350 before incentives.

BMW AG BMW.XE -0.26% Chief Executive Norbert Reithofer unveiled on Monday the auto maker’s first mass-production electric car, saying 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 where it is expected to be priced at $41,350 before federal tax and other incentives. An optional “range extender”—a small gasoline motor—will likely boost the price tag to $45,000. Mr. Reithofer 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 coming government emissions mandates, which in some regions 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.”

Mr. Reithofer boosted BMW’s capital spending in 2012 by nearly 42%, and increased research and development spending by 17% to a total of nearly €9.2 billion ($12.2 billion). Earlier this year he told shareholders he intended to further increase spending on new technology. BMW has dedicated part of a factory in Leipzig to building the i3 and potential future plug-in models.

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

Ian Robertson, BMW’s global sales and marketing chief, said in London on Monday the company “would be profitable from day one on each vehicle it made.” Other BMW executives said the i3’s design drastically reduced the number of parts, allowing for savings on factory equipment. BMW developed with a partner a lower cost form of carbon fiber specifically for automotive uses, company officials said.

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 BMW headroom under those rules to keep selling its more profitable internal combustion 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.

Others are planning pricey electric models. Daimler AG’s Mercedes-Benz brand plans to launch an electric version of its B-Class compact next year, and General MotorsCo.’s GM -0.79% Cadillac plans a plug-in hybrid based on the technology in the Chevrolet Volt. The head of Volkswagen AG’s Audi brand said it may delay 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 and 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. BMW plans to launch next year a sportier cousin to the i3 called the i8, which will have an electric motor driving the front wheels and a three-cylinder gasoline engine driving the rear. Project director Ulrich Kranz said on Monday the plug-in hybrid i8 isn’t a direct rival to the large Model S sedan.

“It’s a super sports car,” he said. The i8 will be smaller than the Model S, and will offer the driving dynamics of BMW’s M3 high performance model but with the fuel efficiency of a small car, Mr. Kranz said.

Mr. Reithofer was 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.

The i3’s unique structure makes possible novel features such as clamshell doors. BMW used dried grass to create a wood-like dashboard material, and recycled plastics are the raw material for the seats.

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’ Chevrolet Volt can travel 38 miles on electricity, and 380 total once the gasoline engine kicks in.