How the Chevy Volt Became a BMW

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- GM ( GM) has been plenty maligned for its revolutionary Chevrolet Volt over the last year, but fear not, GM -- help is on the way!

From BMW.

Let me explain. BMW as a brand started becoming an "in" car 30 years ago and has continued to make progress with only a couple of minor hiccups along the way. In terms of overall prestige and respect, very few -- if any -- car companies today command the admiration of BMW, and for good reason. The kidney-shaped-grill car company from Munich could have continued to ride this 30-year wave for years to come.

Meanwhile, back in Detroit, a small team at GM decided in January 2006 to create a car that would best combine the benefits of an electric car with a car that also could take gasoline for traveling longer distances. This team was started by Bob Lutz and Jon Lauckner, and some of the top engineers on the Volt project included Andrew Farah, Micky Bly and Pamela Fletcher. The project manager overall was Frank Weber.
Chevy Volt
Chevrolet Volt

After almost three years of development, the GM team showed the production version of the Chevy Volt on Sept. 16, 2008 -- before the bailout and the 2009 bankruptcy. Two years of durability testing and preparing the factory in Detroit followed, and when the production car was finally put into the hands of experienced automotive journalists in October 2010, the Volt soon won more awards for "car of the year" than any other car I can recall.

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But it wasn't only the independent and experienced automotive journalists who were impressed by how well the Chevrolet Volt performed -- the competition was, too. BMW in particular.

The top brass at BMW got their hands on a Volt and after test-driving it, they concluded that if they were unable to match the superior performance of the Chevy Volt, over time they would be creamed in the market. So what to do? BMW needed access to GM's secret sauce for this revolutionary powertrain.


On April 11, 2011, the automotive press reported that the Chevy Volt project manager, Frank Weber, had left GM in favor of moving to Munich and become head of BMW's efforts to match the engineering of the Chevy Volt. If you search YouTube, you will find a very long list of videos of Frank Weber describing the details of, and singing the praises of, the Chevy Volt. That trail stops in early 2011. I can't find a single video of Frank Weber following BMW's high-profile hire of him April 11, 2011.

Now we know why former Volt-boss Weber has been in hiding for the last year. BMW has released preliminary information about its i8 model, anticipated to hit showrooms by the first half of 2014.

And guess what? BMW's bet on the future looks a lot like the Chevrolet Volt. Surprise!

Before you spit up that hot coffee and start writing me a nasty response, let me clarify: The BMW i8 is not a perfect copy of the Volt. There are some differences. I am not suggesting certain patent infringement. Let me point out the two major differences between the Chevy Volt drivetrain architecture and that of the BMW i8:

1. BMW has moved the Volt's generator from the front of the car, to the back.

2. BMW has added an electric traction motor in order to enable all-wheel drive, similar to the Tesla ( TSLA) Model X prototype unveiled on Feb. 9.

But really, when you consider all the alternative architectures BMW could have chosen, the BMW i8 is very similar to the Volt. Just consider the Volt's revolutionary on-axis placement of the gasoline generator with the generator-motor and the main traction motor. On the Volt, that package sits up front. On the BMW i8, it sits in the rear. BMW has not released information about whether the on-axis design is substantially identical to the Volt's -- or not. In GM's case, it didn't release this information either, until just before production started, so that it could file all the patents.

It is the power-combining of that on-axis placement on the Volt that yielded GM supposedly over 200 patents. How would BMW get around those patents?

For a more detailed description of the patented genius of the Volt powertrain, see this 36 minute video featuring Volt chief powertrain engineer Pamela Fletcher taken in October 2010, shortly after GM filed its patents.

Once you have watched that video, just imagine moving that powertrain from the front wheels to the rear wheels, and then adding an electric traction motor between the front wheels, and you have . . . a BMW i8! It's a distinction without a difference, as we say.

Furthermore, the BMW i8's battery looks to be almost the same shape as in the Volt -- and for that matter the Fisker Karma. It's placed in the center tunnel, which is where it is best protected from a crash perspective. By the way, that Henrik Fisker guy -- he was a top BMW designer, but long before he founded his own car company.

The benefits of the Volt architecture would then also apply to the BMW i8: All-electric range for some distance, in the Volt's case 25 to 50 miles, followed by "extended range" where the battery is charged by the gasoline generator for another perhaps 300 miles or more. If you assume 40 MPG and a 9-gallon tank, that's another 360 miles following the first 25 to 50 all-electric miles.

Marketing Bonanza

It looks from the early information about the BMW i8 that it will be a much more expensive car than the Volt because it will be built with much more expensive, aka lightweight, materials. Using these expensive materials, the BMW i8 will obviously weigh a lot less, and therefore yield faster acceleration and perhaps longer range.

Media speculation about the BMW i8 has suggested that the price may be as high as $100,000 to $120,000, or many times above a fully loaded Chevy Volt, which sells for $44,575 before tax credits. The price of the i8 is of course pure speculation at this point.

Here is where the fun starts for GM: Marketing. When the i8 hits the market, what will BMW call it? "BMW's answer to the Volt"? "How BMW copied the Volt but tripled the price"?

Somehow I doubt it. BMW is likely to stay away from admitting that its new flagship car is essentially a re-jumbled Chevrolet Volt built by more expensive, light-weight, materials.

But from GM's side? I'm expecting a field-day! The mood at the GM marketing department surely will resemble a late-night comedian's show-prep following a major presidential gaffe.

Some ideas for GM's marketing department: "BMW's version of the Volt: Only triple the price!"

"BMW's new flagship copycat car: Only three years behind the Volt."

I predict that as the BMW i8 hits the market in early 2014, either of two things will happen:

1. Now that BMW has validated the Volt design by pulling out all the stops to copy it, it will finally bring the Volt the kind of respect it earned right away by those who have actually driven the car -- whether automotive journalists or, of course, the owners themselves.

2. On the downside potential, will the fact that Frank Weber led the Volt project and then transferred it to BMW, transfer the Volt pox onto BMW's door? In other words, will this new car from BMW mean that the BMW image would turn negative because a key BMW engineer led the Chevy Volt project? Will the people who criticize the Volt today start dumping on BMW to the same degree?

I think that the former will be more likely. With BMW betting the company on the Chevy Volt drivetrain architecture, it is likely that this will bring the ultimate vindication for GM. It will be time for the Volt critics to cut their losses at that time.

It is worth reminding Volt watchers that the Chevy Volt has the highest customer satisfaction rating of any car in the U.S. market, according to Consumer Reports -- even higher than the Porsche 911. A record 93% of Volt owners would recommend the car, compared to 91% for the Porsche 911. Conversely, close to 99% of all people criticizing the Volt have never driven it.

And what would be the only car company with even higher respect and customer esteem than BMW? Yes, that would be Porsche.

Volt 2.0

But wait, there's more!

The BMW i8 will hit the market no later than the first half of 2014, which would be at least three years after the Chevy Volt hit the streets, in late 2010. What has GM done in the meantime? Been busy developing the Volt 2.0, that's what!

GM will be in a position to launch the Chevy Volt 2.0 and the Cadillac ELR, which is the two-door version with a more plush interior, also by early 2014. By the time the BMW i8 hits the market, the market leader -- GM -- should also hit the market with two improved Volt models: One Chevy version focused on cost reduction, and one Cadillac version focused on the luxury market.

Think iPad here. By the time competition arrived for the iPad, Apple ( AAPL) launched the iPad 2. And we all know how that went. The early leader maintained its grip. GM most likely also has additional cars based on some tangent of the Volt platform in store for late 2013 or 2014. Can you imagine a Chevy Suburban, Cadillac Escalade and a minivan based on the Volt? All would be obvious hits in their respective segments.

What's the bottom line here? BMW's best engineers examined the Chevy Volt and concluded that it was going to be the car to beat. They were so desperate to copy it that they hired the chief project manager of the Volt to make it happen as quickly as possible. I think BMW's finest engineers know a little more about what makes the best car, than some U.S. pundit who has never even driven the Volt.

Imitation is the sincerest form of flattery. And that's what will bring GM its ultimate form of Volt vindication, in 2014, just like everyone have been trying to imitate Apple's iPad for two years now.
At the time of publication, the author was long AAPL and TSLA, although positions may change at any time.

Anton Wahlman was a sell-side equity research analyst covering the communications technology industries from 1996 to 2008: UBS 1996-2002, Needham & Company 2002-2006, and ThinkEquity 2006-2008.

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