The decisive battle of electrified luxury car companies starts with reshaping their brands.

A few days ago, the BMW Group announced that it will continue to step up its transition to electrification, and after 2025, the MINI brand will focus entirely on the pure electric field. Earlier, Jaguar Land Rover also announced that the Jaguar brand would be transformed into a pure electric car brand by 2025. As early as 2017, Polestar, Volvo's high-performance division, announced that it was an independent brand focused on high-end electric vehicles.

MINI, owned by BMW, Jaguar, owned by Jaguar Land Rover, and Polestar, owned by Volvo, are among the brands of their car companies. So what are the factors behind these luxury car companies' choice to take the lead in pushing a brand from the fuel sector to an electric track?

Driven by the trend of electrification

Today, with the development of new energy vehicles, the concept of electrification has become a global industry consensus. When Tesla's market capitalization surpassed that of Toyota and Volkswagen, traditional car companies strengthened their determination to transform to the electric field. In recent years, the German luxury Big three have acted frequently in the field of electrification, and this year, they have each set bolder goals.

BMW Group announced at the 2020 results conference held not long ago that this year, BMW Group will launch all-electric BMW iX and BMW i4, BMW Group will provide about 12 all-electric models worldwide by 2023, and BMW will deliver 2 million electric vehicles worldwide by 2025. Of course, this also includes the aforementioned strategy of electrifying the MINI brand in 2025.

Audi also demonstrated its determination to deepen its electrification strategy at its annual earnings meeting in 2020. In addition to continuing to dig deep into the Chinese market and expanding electrified products, Audi also plans to deliver 1/3 of its new cars worldwide in 2025. Pure electric or hybrid models. By 2030, the Audi A6 and Audi A4 will all be converted to pure electric models.

Mercedes-Benz also recently said that in order to achieve "Vision 2039" (carbon neutralization of the new passenger car lineup by 2039), it plans to achieve more than 25 per cent of sales of pure electric models by 2025; by 2030, plug-in hybrids and pure electric models will account for more than 50 per cent of global sales.

In addition to the German luxury troika, the previously mentioned Jaguar Land Rover and Volvo have also developed a relatively clear electric development route. From this point of view, in this once-in-a-century energy revolution in the automotive industry, all car companies can not stay out of it, and then they compete over who can achieve carbon neutrality more quickly.

Rely on fuel vehicles to provide profits

Electrification of transformation is not a slogan, but it requires a lot of human, financial and material resources to be put into real action. In the objective environment of the spread of the epidemic and the decline of the global economy, where the money comes from has become an urgent problem that traditional car companies in transition have to face.

Looking at the financial reports of the major car companies in 2020, we will find that the revenue and net profit of most car companies are declining in fiscal year 2020. Of course, there is a direct impact of the decline in sales performance caused by the epidemic. However, the high cost of enterprises' transformation to electrification cannot be ruled out. For this reason, giving full play to the "group synergy" and "reducing costs and increasing efficiency" have become the main theme of most automobile enterprises in recent years.

However, for luxury car companies, although sales and revenue declined in 2020, profits are still sizeable, such as Mercedes-Benz and Audi with sales returns of more than 5% in 2020. Where do these profits come from? Obviously, it is the profits brought by their own fuel vehicles. Although the major luxury car companies are accelerating the electrification strategy, very few of them can really bring benefits from electric vehicles at this stage, so these luxury car companies have to use the profits of fuel vehicles to fill in the research and development of new electrified models.

This explains why BMW, Jaguar Land Rover and Volvo take the lead in switching from a single brand to an electrified racetrack, while major brand models are gradually switching from fuel vehicles to electrified models. The aim is to continue to absorb profits from fuel cars.

Reduce risks and deal with market uncertainties

Furthermore, although the annual sales of new energy vehicles have increased greatly, it still accounts for a small proportion compared with the huge fuel vehicle market. Take 2020 sales as an example, according to statistics from the car Federation, global car sales in 2020 totaled 78.03 million, down 13% from the same period last year; according to data compiled by Sweden's EV-volumes.com, global sales of new energy vehicles in 2020 were 3.24 million, an increase of 43.36% over the same period last year. Based on this, it is estimated that the sales of new energy vehicles account for about 4.15% of global car sales in 2020.

Analysts of the Global Automotive Research Institute believe that at this stage, there are still many aspects that can be improved in battery safety, charging convenience and other aspects of new energy vehicles, and these factors are also the key factors affecting the rapid popularity of electric vehicles. However, with the improvement of the infrastructure construction of new energy vehicles and the reduction of the cost of electric vehicles under the industrial synergy effect, electric vehicles will develop rapidly.

Galaxy Automotive Research predicts that by 2030, sales of new energy passenger cars in China will account for 30% of total passenger car sales. 35%. According to the latest research report provided by Canalys, global electric vehicle sales will increase to 30 million in 2028 and will account for nearly half of global passenger car sales by 2030.

Judging from the above data, the market position of new energy vehicles can be "on an equal footing" with fuel vehicles, and it will not be realized until 2030 at the earliest. This is another big factor that traditional car companies will not easily switch to the electrification field. Industry analysts believe that brands such as MINI and Jaguar are the first to cut into the electrification field, which can greatly reduce the risk in the case of limited user acceptance of electric vehicles.