Interview: BMW Motorrad CEO Stephan Schaller

Stephan Schaller, 57, has been the President/CEO of BMW Motorrad since June 2012. A qualified mechanical engineer, he first worked for the BMW Group from 1981 to 1999, initially as a trainee in what was then the Technology Division, before going on to hold various management posts, including heading up production at BMW’s Rosslyn automotive plant in South Africa.

Schaller then crossed to the rival VAG/Volkswagen Audi Group, serving as a member of the Management Board of Volkswagen from 2004, and as the CEO of Volkswagen Commercial Vehicles from January 2007. He then became Vice Chairman of Schott AG in Mainz, an advanced optics manufacturer, before rejoining BMW in 2012 to head up its motorcycle division. The chance to talk to him in his office in Munich provided a window on BMW’s continued sales success and ongoing global expansion.

Interviewer: Alan Cathcart (AC)  and BMW CEO: Stephan Schaller (SS)

AC: Mr. Schaller, you’ve had a very successful recent tenure as CEO of BMW Motorrad. I understand last year was a record one for the company?

SS: Indeed so. We sold a total of 123,495 motorcycles in 2014, so a 7.2% increase over the 115,215 we made in 2013, and the first time BMW sold more than 120,000 motorcycles in a single year. But we manufactured around 130,000 units, definitely a lot more than last year because we had a little change in our philosophy to stock more at the beginning of the year. And this year has indeed started very positively for us, with 6,263 maxi-scooters and motorcycles delivered to customers in January, a sales increase of 15.2% compared with January last year [when 5,438 BMW two-wheelers were sold – AC].

Alan Cathcart with BMW CEO Stephan Schaller

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AC: To what do you attribute the current success of BMW Motorrad?

SS: I think this is definitely not something that happened in the past two years, but was prepared long ago in the past. I joined BMW company’s car division back in 1981, and I was working there for nearly twenty years in different positions in the highly motivated car team before I went away to learn something else from other companies, such as Volkswagen. I then had the chance to come back to this BMW motorcycle division, and I must tell you the motivation in this team is even beyond what I already experienced in the car division, and I believe this is the main reason for our present success.  

More than 80% of the men and women working for BMW Motorrad ride motorcycles on a regular basis, so it’s their passion as well as their job. This means they know what they are talking about when it comes to developing products and marketing them, because it’s also their hobby just as it has been mine for the past 40 years. I see that that highly motivated team’s personal involvement and hands-on knowledge about motorcycling as responsible for a big part of BMW’s current success on two wheels.

BMW R 1200 RT

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So we have an expert development team able to create a wide range of different products which are appealing to different sectors and segments of the market. But I can tell you that at least since I’ve been here there’s been no bike released to customers before the top management team – so, myself and my guys directly running the company – have intensively ridden that bike, so we know exactly how it feels to our customers. Of course, our development engineers are better at riding than we are – but we are average riders who are probably closer to the customer than the highly expert guys whose skills are needed to test the bikes. So we know very, very well in advance how they behave, and what we are giving to the customer.

AC: Is another key ingredient in BMW’s record growth that you have successfully expanded your global reach into new markets?

SS: Yes, indeed – so for example last year we sold close to 8,000 bikes in Brazil, and this year it will be more than 10,000. Germany was again our No.1 market, with 21,714 units sold there, but Brazil is after the USA [15,301 units – AC], France and Italy the fourth biggest export market for us. We have manufactured a couple of parts locally, but the main focus there is on CKD [complete knocked down motorcycles made in Germany for local assembly – AC], and the factory there will grow bigger as we continue to expand there. So Brazil came first, but one year ago we also started assembling bikes in Thailand. We already had car production there, but since January 2014 we have also started assembling BMW motorbikes, firstly the F800 models. But this is only the starting point, and we have plans to produce several other different models there for sale in the Southeast Asia region, with the advantages in duties we get from manufacturing in Thailand.

Stephan Schaller

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AC: Across the water from Thailand, India has significant export potential for Western manufacturers, but is itself already a significant motorcycle producer. BMW has forged an alliance with TVS there. When we can expect to see some products emanating from that alliance - and what kind of bikes will they be?

SS: Yes, we searched for a long time to find the right partner in cost-effective manufacturing countries, not only India, and as a result of this search we found TVS. We announced in April 2013 that we will jointly produce several different designs of bikes on the same platform - so we will use local sourcing for components, but the engineering is 100% done by BMW. This is a real win-win situation where we have the engineering know-how that the Indian company learns from, and they have the cost base which BMW Motorrad can benefit from globally. Looking at this company, I am 100% convinced that TVS is able to do first-class quality. You can eat off the floor of their factory, it is so clean and well ordered - this is first class not in the technological sense as you find it in BMW factories, but translated to the needs of that region. So it’s a 100% suitable base for us to get really competitive bikes out of, in terms of quality matched to price.

AC: You mentioned a common base - will TVS produce its own range of models using the same platform as BMWs?

SS: To a certain extent, yes

AC: So for example there would be a shared engine?

SS: Could be.

AC: How big are we talking about - 250-300cc? There have been photos on the web of what appears to be a prototype single-cylinder TVS-BMW of around that capacity!

SS: We always said - and I am not saying more today - it will be below 500cc.

AC: Single-cylinder or twin?

SS: I think a single is a good place to start. We will reveal more of this within the next two years – sorry, I can’t be more specific.

BMW R nineT

BMW-R-nine T-658 (2)

AC: Will these TVS-BMW products be marketed in a similar way to those made in India by Bajaj for your KTM rivals – so, as entry level products in developed markets, and prestige models in developing markets?

SS: First of all there is a big difference between the KTM Bajaj and BMW TVS linkups, because we don’t have any financial implications between us. It’s the way I just described before – there is a mutual interest in building new models, and we call it cooperation

AC: Of course, this would be the other way round from KTM and Bajaj, where Bajaj bought a significant part of KTM stock, and I doubt TVS is going to buy part of BMW! Do you plan to invest in TVS?

SS: This is not on the table at the moment. This is a very strong fourth generation privately-owned Indian company which has no need at the moment for outside investment. Everything works very well at present on a partnership basis without financial links. But to go back to what you said just now about different level bikes for India and for the rest of the world – no, this is not the case. We have now five production locations for BMW Motorrad – besides our main factory in Berlin, we have Thailand, Brazil, China and coming soon India.

Every bike that is produced in one of these five locations is under our name, under our badge as made by BMW, so they are all for world markets. There is no differentiation like saying the one production is for low-priced markets, and the other production is for high-priced markets – we don’t have this with TVS.

BMW CEO Stephan Schaller

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AC: So in India TVS will be producing a dedicated sub-500cc BMW model range. But those other plants you mentioned are assembling BMWs from CKD kits, which therefore have to be manufactured in Berlin. You are now at the stage of building 130,000 units there annually. Are you going to run out of capacity there?

SS: No, we have made a lot of investment in what is a historic factory for BMW, adding lots of different buildings to expand production. This gives us more than sufficient capacity in Berlin to look after the other four locations, especially in terms of manufacturing the more complicated engines built there.

AC: So no need to establish another BMW factory within Germany or in another European country to take up the extra demand?

SS: We have five, and they are placed in the right regions. Berlin is more than enough at present to satisfy demand in our core European market, covering also the USA, our biggest export market.

AC: How about China, where you have had an agreement for some time with Loncin to assemble the F650 engine, without ever developing that alliance. Are you thinking of expanding there?

SS: We started eight years ago with Loncin, with a contract first for single-cylinder engine assembly. Doing business with the Chinese is not very easy – it is very important to establish a relationship, and with Loncin we have now developed such a relationship. We have therefore decided to produce a second engine there, a twin-cylinder middleweight design which is currently under development. This is a more complicated engine which will someday fire BMW’s new mid-capacity class models. This is a very good basis for continued expansion of our relationship with Loncin.

BMW 1200 GS

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AC: Would you consider having your electric vehicles manufactured by them also, because in China they have a huge electric motorcycle and scooter industry since combustion-engined motorcycles are essentially not allowed in any major cities or on freeways?

SS: Yes, and no. Let me answer in principle to China. Besides the Loncin-built products we export lots of CBUs [complete built up motorcycles made in Germany – AC] into China, and we see the future Chinese motorcycle market behaviour following the car market, which has expanded so greatly in the recent past. So we feel that it’s about to start growing also for big bikes, in which there’s growing interest in China, and I personally believe this will be a very important market for us in the future. However, saying that and being often in China myself, it’s obvious that there is a pollution problem, and it’s only logical that electric mobility will be an issue. We have the only offer in the electric range which is a high performance two-wheeler – basically, our C-evolution scooter has 11kW continuous output, peaking at a maximum 35kW, but the millions of electric small vehicles which you were talking about in China are all below 1kW, so this is not the class we are entering. With our scooters we have a real, real performance bike and the day will come when legislation could change where particularly in the big cities of China because of pollution they will give electric two wheelers the right to use the freeways. Until then, I don’t see sales picking up so much beyond the rich Chinese for whom it’s a toy, which was the case in Germany a while ago.

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AC: But won’t those rich Chinese will also want an exclusive high end electric two-wheeler to commute on?

SS: Not only the Chinese want that! If I could get a GS today with electric drive I think I would prefer it to the combustion version. Which vehicle is better suited for electric power than a two-wheeler, where you have maximum torque from the very beginning, and can have a very fine throttle sensitivity? We only have to wait for the batteries to develop further, therefore the logical first step is the C-evolution delivering urban mobility, because you don’t go more than 100km in cities.

AC: But would not building the C-evolution - which seems likely to be the first of many BMW electric two wheelers - in China give you a better chance of reducing the retail price through economy of scale, making it more appealing to customers there who already understand the advantages of E-vehicles, as well as those in Europe or USA where you actually have to do a missionary job on convincing people to give it a try?

SS: Firstly, we are totally on target with sales of the C-evolution, which is quite expensive and was always intended to set a footprint, and then see how the market reacts. As you know, battery development develops quite rapidly in a positive direction, so we have some reasons to think that this is the right strategy. We will indeed homologate this bike in the not too distant future for China. Then we can test the water there and if that testing goes in the direction which you just outlined, then we have partners there to enable us to respond. Making anelectric bike is not too complicated once you resolve the problem with the battery, so I could well imagine doing so in the market where we have the biggest demand. If it’s China I would not be reluctant to do so – but maybe it could also be another country, in which case we are flexible enough to go where the economy of scale gives us the biggest benefit.

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AC: As you say, the batteries are the big issue with electric vehicles of any kind, and I remember when I discussed this with your predecessor Mr. von Kuenheim about four years ago he told me that at the moment everyone uses lithium ion batteries, but apparently there is lithium air and even zinc air battery technology under development which gives a much greater capacity and thus range, and that this should become available in about 2022-23 for civilian use. Can you update me on that from BMW’s standpoint?

SS: The good thing is that we are travelling in the slipstream of our car division - the cars set the pace, and BMW Motorrad get spinoff technology from them, so at the moment we use just one of the exact same battery modules found in the BMW i3 car. We are much too small to talk about battery technology with Samsung or the like ourselves, but the BMW car guys are very strong there, and we know from them the pace of development of battery technology allied with costs. From this we are quite confident that it could be sometime in that range that you mention, in the mid-2020s, that we can expect to have an even balance between the costs and performance of combustion and electric vehicles alike - and then we have a completely different ballgame.

AC: Is it your ambition for BMW Motorrad to become the reference point amongst Western manufacturers for electric two-wheeled products, as your car division evidently is for cars?

SS: Yes, it is my intention that BMW must set the pace in development of this kind of technology on all segments in motorcycles, as in cars.Whenthe time is right - and that means when we have the right battery technology, with a range of 300-400km - I am convinced our industry will change, and we must be leading it.

BMW i3

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AC: What about other fuel sources – for example, is BMW working on a diesel motorcycle?

SS: We have one under development, but beside spark combustion engines we are focusing on electric for the future, since we have a big advantage in being able to participate in what our big brothers are developing in the car segment.

AC: But your car colleagues are also particularly expert in diesel technology, and in many of the developing markets that BMW is now entering with your Indian built products fuel consumption and running costs are key issues. Would a diesel motorcycle not be a potentially attractive purchase for a BMW customer in India or Bangladesh or sub-Saharan Africa?

SS: From a consumption point of view? I’m not so sure. We could produce such a bike - in our development garage one already exists, and anything is possible. But if we can achieve two-point-something litres per 100 kilometers consumption on our smaller gasoline-engined bikes, I don’t see the potential cost-effectiveness at the moment of investing in new diesel technology for motorcycles.

BMW R 1200 RT

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AC: How about hybrids? TVS’s market leader rival in India, Hero MotoCorp, is about to begin production of its electric hybrid scooter, the Leap.

SS: It’s the same – I don’t see the cost-effectiveness of developing something that is going to be more expensive, and also heavy.

AC: Having a look at other forms of technology, BMW was once the world leader in supercharging - a technology which has suddenly now become fashionable again with the arrival of the Kawasaki H2R. Before meeting you here today I visited the BMW Museum, and saw the 500 Kompressor that won the Isle of Man Senior TT 75 years ago. I understand that BMW did do some work on a Kompressor Boxer streetbike in the mid-2000’s, but that it was set aside because of the worldwide recession. Yet here is Kawasaki launching a supercharged motorcycle. Is BMW planning to do the same?

SS: Definitely in the short term we are not planning to do so. We have our unsupercharged roadbikes that as you know are already running very fast – they have more than 200 horsepower. So the question is the same as with other alternative technologies – BMW is capable of producing anything, but do we have a market for it? Can we envisage volume sales for it? Is it the right thing to do, and is now the right time to do it? What we did with the R NineT last year worked so well because it was the right time for BMW to step into the Custom market, and be investing in that. So my answer is that in the short term we are not planning a Kompressor - but if the time is right and it becomes the right thing to take it forward, then we are ready with all the basics to move very fast on one.

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AC: But another advantage of supercharging besides outright performance is that it allows a small capacity engine to have the performance of a larger one, but with reduced emissions and manufacturing costs – just like the original MINI Cooper S developed by your car colleagues. Isn’t this of interest to BMW Motorrad?

SS: Let me take a larger view, with two main headlines. One is ‘Road Safety’ where we always invest heavily - we started working on ABS twenty years ago, before anyone else. We want to continue working on such features. The other big headline is ‘Environmentally Friendly Development’ and under that is electricity first, reduced emissions and low consumption in different engines, and so on. Of course we think of diesel, we think of Kompressor, we think of Turbo, we think of all this stuff, and we would be a bad company if we did not have this in our pre-development garage. But that’s not to say that we plan to bring it to market, and we first want to set the pace in electric.

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AC: BMW has always been at the leading edge of alternative chassis technology, but your new R1200R has had its Telelever front end replaced with a conventional telescopic fork. Was this done for any other reason than a packaging one on that model? Or is this a change of direction for BMW from a technical standpoint?

SS: No, the main issue is the packaging for each new model, for which we have to develop different strategies. Here we did not have the space consistent with the styling and packaging to fit the very bulky Telelever system, which would have required different cooling radiators and so on. But the ride quality and roadholding in this application are not compromised by removing the Telelever, whereas on the GS you have more space to fit a Telever, which gives you extra control and front wheel travel, so it is necessary for this type of model.

AC: So there will be other BMW motorcycles in future with a Telelever front end?

SS: Yes, indeed. Depending on the model it can be Telelever in future, or upside down telefork or Duolever – or maybe something else! As we develop other bikes in the future you will see different technologies there.

AC: One family of BMW models that hasn’t really developed since its launch in 2011 is the six-cylinder K1600 range. What plans do you have for this in the future?

SS: I’m happy with the sales of this model segment. It’s a very nice long distance bike which is gaining lots of fans in the USA and all over Europe, and we are definitely heavily working on further developing the range of models powered by that wonderful engine within the two to three years.

BMW K1600 GLT

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AC: Will you make a customer version of the Concept 6 showbike which kicked off the six-cylinder family in 2009? It would appeal particularly to the American customer because as a Custom Cruiser with sporty appeal. Is BMW developing an American style six-cylinder Custom bike with it?

SS: (Laughs) No, you are reaching my border of communication! I can tell you we are definitely working on entering strongly into a big section of the market in the U.S with the right answer. Sadly the Concept 6 does not work as a production model, even though it looks so very good.

AC: Would this US market model come with a six-cylinder engine?

SS: Could be! We have different options, but the six-cylinder of course could fit very well what a US customer wants.

BMW R1200 Cruiser

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AC: That then pre-supposes that BMW might be interested in the Cruiser market - you haven’t had a Cruiser model since the R1200C, and that’s a huge market globally. Are you going to do anything about it – perhaps by developing a V-twin?

SS: No, you’re right, we don’t have a Cruiser - but we must indeed find the right answer to enter the biggest motorcycle segment of our largest export market, which is the USA. However, we are definitely not going to do so by copying another brand, because this was never successful in the past. We must follow our own rules.

AC: Yes, but BMW reinvented the four-cylinder hypersports model by taking a Japanese-style inline four and doing it differently. Why wouldn’t you do the same thing with a V-twin for the cruiser market, but do it differently than Harley-Davidson?

SS: If we did a V-Twin we definitely would do it differently, but we also have our BMW heritage and perhaps that is a more important consideration.

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AC: So no V-Twin BMW?

SS: I did not say no six-cylinder cruiser, so I do not say no V-Twin! I don’t want to go into more detail right now, but this model segment is indeed very interesting for us, and up to now we are not really there, so this is an open target for us. As you know, we want to grow further in the next few years, and we have two main options to do so. One is to find new markets where we are not really present in yet, so for example China, Latin America, Southeast Asia and India, and the other one is new model segments. One key segment is below 500cc, which we are working on, and the other segment is obviously the biggest one we are presently absent from - Cruisers.

AC: How about Motocross or Enduro models – does BMW have any plans to return to the offroad segment? Have you thought better of selling Husqvarna to your KTM rivals?

SS: No – we did that because we don’t see a viable market in the future there for us, and I still don’t.

AC: BMW was competing with a factory team in the World Superbike championship, until it pulled out of road racing officially soon after you came on board to head up the company. What was your reason for doing this?

SS: Because I believe you should stop when you have reached your goals. It costs a lot of money to go racing, and we originally entered that segment because we had produced the inline four-cylinder S1000RR Supersport model, but nobody knew BMW as a producer of Supersport bikes. We went racing officially in World Superbike to show that this bike is fast enough to finish on the podium in the first three positions. We did this for some years and very successfully, winning several races. Meantime the test comparison reports in motorcycle magazines showed we are No.1 in this streetbike segment, and so did our sales volume, which at the end of the day is what where we are here for.

We are not a racing company - we are a volume manufacturer that wants to show that our products are on top even in that Supersport segment derived from motorsport competition.

Having done that, we decided we preferred to invest the money we would have spent on going racing ourselves into widening our range of models, while not neglecting - and indeed strengthening  - our support for our Supersport customers. I’d rather put my money into helping BMW’s Supersport customers win a race trophy than support World Superbike activities with our own factory team, which costs a hell of money.

BMW S 1000 RR

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AC: Understood, but since you pulled out of racing the Hypersport market has now suddenly exploded again after being dormant for three or four years, and you have Yamaha, Ducati and Aprilia producing new models to compete in this. BMW got its retaliation in first with the new S1000RR – but don’t you feel the need to race that competitively, so as to demonstrate at the highest level on the racetrack that this is the best bike in its sector?

SS: As I said, our customers come first, and when they go racing we will support them. Let me clearly state this - we will definitely not establish our road racing factory team again, neither for MotoGP, nor for World Superbike, because we prefer to invest that money in widening our product range, and supporting our customers. This is a very important segment for us and, our target is to be the best company in the future for supporting normal privateer riders. Therefore we will continue to invest in that segment heavily, and that’s only possible if we don’t spend a large amount of money competing officially in World Superbike or MotoGP.

AC: So, definitely no BMW in MotoGP?

SS: No – we stay out.

AC: Where is BMW going in the future? Aside from the C-Evolution electric and C650 scooters, with the arrival of the sub-500cc single-cylinder family which you’re developing with TVS, BMW will have six distinct families of bikes – the Boxer twins in both air-cooled and watercooled formats, G650 single, K1600 six, F800 twin, S1000R inline four - or maybe even seven, if you have a twin-cylinder one Made in India. Do you foresee that this will continue to expand, or are you now going to focus on doing the best you can in those particular model segments?

SS: Without any tremendous development effort we can use what we already have, and widen it still further. There are lots of smaller model segments it’s possible to make without developing a complete new model platform. For example, within the next two years we’ll have a Scrambler based on the R NineT, as well as a Café Racer. There are other examples of diversification within each of the other model families without extending their number further.

AC: Were you surprised by the success of the R nineT?

SS: We were not surprised to enter the Custom segment successfully with this bike, but to be honest it went well beyond our expectations. For this bike to race to number four in the list of bestsellers in BMW’s entire range after the GS and GS Adventure and the R1200RT was completely unexpected. It was a nice surprise, although it gave us a good problem to catch up with production – we had lots of customer complaints that they wanted the bike, and had to wait four or five months to get one!

BMW R nineT

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AC: The R nineT was created for you by Roland Sands – do you have him under contract to make other models?

SS: The answer is yes - we will work together with Roland Sands in this direction even more closely. He creates these wonderful motorcycles in terms of styling and flair, but they actually work, they are functional - they are not like so many other custom bikes that are just nice to look at, but you wouldn’t want to ride one. Plus he’s a great guy, not only in terms of his personality, but also from his intellect and his ability to understand motorcycles. And of course with BMW there’s a huge base of potential customers for him to make money from - we have hundreds of thousands of bikes out there being ridden which he can find the right way to offer aftermarket parts to.

AC: Presumably therefore the only thing wrong with Roland from BMW’s standpoint is that he drives a Mercedes-Benz?

SS: Then we have to work on that!

 

This article appeared in AMCN Vol64 No21

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