EFFICIENT DYNAMICS: Energy Efficiency is Essential in Motor Vehicles

At BMW, Dynamic Performance is Equally Essential.
How BMW is Achieving Both Goals, Today and Tomorrow.

Woodcliff Lake, NJ - January 4, 2006... Motor-fuel prices hovering between $2
and $3 per gallon in the U.S., much more in some parts of the world. Hybrid
vehicles the "talk of the town." Americans, accustomed to inexpensive and
plentiful fuel, are newly aware of energy efficiency in motor vehicles. We at
the BMW Group - we who design, engineer, market, service and otherwise
represent BMW - have always been concerned with the efficiency of our vehicles,
and for us too this awareness is newly heightened. Who, indeed, could ignore
worrisome current events and trends: oil production and refining interrupted by
hurricanes; rapidly increasing energy consumption in developing countries,
especially huge China; and the paradoxical proliferation of large, heavy Sport
Utility Vehicles not only right here at home, but in unlikely places like
France?

In motor vehicles, there is a historic tradeoff - perceived, at least - between
performance and fuel consumption; between luxury and fuel consumption; even, in
some perceptions, between safety and fuel consumption. The more of one, so the
legend goes, the more of the other. And yet the creative minds that design and
engineer motor vehicles have always been able to improve on that tradeoff, that
compromise: to achieve better performance, greater luxury, enhanced safety and
other desirable attributes without correspondingly higher fuel consumption. And
when the challenges increase, as they are doing in our time, creative minds
rise to the challenge, motivated to achieve greater progress.

BMW: always a leader in efficient dynamics
For a little historical perspective, take the car that put BMW "on the map" in
the U.S.: the 2002.

There it was, the BMW 2002, arriving in 1968 - a time when the typical American
automobile was powered by a large V-8 engine, likely loaded with an inefficient
automatic transmission and multiple power features, large and heavy: fuel
economy simply wasn't a priority.

Yet in Europe, fuel economy had always been a priority: high taxation of motor
fuel simply made it so. Even so, BMW had cultivated a tradition of dynamic
performance. The 2002 typified BMW's efficient dynamics of the day: a compact,
upright sedan seating four persons, weighing only 2210 pounds when most
domestic cars were closer to 4000 lb., and achieving lively performance - 0-60
mph in 10.4 seconds, according to Road & Track, June 1968 - while also
achieving fuel economy superior even to that of domestic "economy" cars. (There
were no EPA mileage ratings in those days, but Road & Track reported 22-27
mpg.) More importantly, the 2002 was fun to drive. In testing the 2002's
smaller-engined but otherwise similar predecessor, the magazine concluded that
it was "one of the best automotive values from any country - brimming with
handling, ride, finish, refinement of running and even good style." Now BMW
added more power into the equation. The 2002's message was: performance, fuel
efficiency and, not incidentally, practicality too in one fun-to-drive vehicle.
Efficient Dynamics.

All due respect to the advances that had been, and were being, achieved by U.S.
automobiles. They pioneered the mass production of powerful V-8 engines,
automatic transmissions, power steering, air conditioning and other comfort and
convenience features; but fuel-efficient they weren't, nor were they "dynamic"
in the overall sense of the word.

BMW's Efficient Dynamics today
The world and its motor vehicles have changed dramatically since 1968. So has
BMW. But the BMW philosophy of Efficient Dynamics has remained a constant.
Perhaps more than any other motor vehicles in today's world, the widening range
of BMWs powered by the new N52 6-cylinder engine perfectly defines Efficient
Dynamics. Compared to their predecessors, they offer even livelier performance
and, in most of the available vehicle versions (engine, transmission, rear- or
all-wheel drive) superior fuel economy as well. A couple of specific examples:
325i Sedan, '06 vs. '05. With automatic transmission (now a 6-speed), the new
model sprints from rest to 60 mph in 7.2 sec., vs. 8.1 sec. for the '05. Its
EPA mileage ratings are 21 mpg city/29 mpg highway, vs. 19/27 in '05.
330i Sedan. With automatic transmission, 0-60 in 6.3 sec. vs. 7.0 for the '05;
EPA mileage up from 19/27 to 21/29.

A prime reason for such progress is BMW's exclusive Valvetronic system, which
replaces the conventional engine throttle with variable-lift intake valves.
This same advance appeared earlier in BMW's V-8 and V-12 engines, and delivered
similar results there too. For example-
X5 4.4i, a V-8 model of BMW's larger (but not huge) Sports Activity Vehicle.
With no increase in engine displacement (size), the '04 X5 4.4i's engine
delivered 315 hp, vs. 290 in '03; achieved 60 mph in 6.8 sec. vs. the previous
7.4; and attained EPA ratings of 16/22 mpg vs. 14/18 in '03. Here, as with the
6-cylinder models cited above, a new 6-speed automatic transmission also played
a role in the advance of both Dynamics and Efficiency.
745Li, a long-wheelbase luxury sedan with a V-8 engine similar to the X5 4.4i'
s. When introduced in 2002, the 745Li delivered 325 hp, a good 15% more than
its predecessor. And its EPA ratings were 18 mpg city/26 mpg highway, compared
to the previous model's 17/23.

Looking at a wider time span, the 1990 BMW 535i Sedan was powered by a
3.5-liter, 208-hp 6-cylinder engine; weighed 3615 lb.; accelerated from 0 to 60
mph in 8.7 sec., and achieved EPA mileage of 16/21 with automatic transmission.
Its current counterpart, the '06 530i Sedan, is larger, roomier, and equipped
with more luxury, convenience, and safety features. It is powered by a smaller
but much more powerful 6-cylinder engine: 3.0 liters, 255 hp. Thanks to the
intense technological development applied since 1990, the '06 model is also
lighter, at 3472 lb. It attains 60 mph in just 6.6 sec., and turns in EPA
mileage of 21/29! On top of this, the '06 model meets more stringent emission
limits than the '90.

Another excellent example of "more efficient, more dynamic" via long-term
engineering development is BMW's volume leader over the decades, the 3 Series.
The 1990 325i Sedan with automatic transmission had a 2.4-liter 6-cylinder
engine developing 168 hp; it accelerated from rest to 60 mph in 9.4 sec. and
turned in EPA mileage of 18 city/22 highway. Today's counterpart, the '06 325i
Sedan, also with automatic transmission, is larger, roomier, more refined,
better equipped and of course fitted out with more safety features and
technology. Yet amazingly, it is much quicker, doing 0-60 in just 7.2 sec., and
is rated by the EPA at 21/29 mpg. Talk about progress in Efficient Dynamics!

Advanced engine and transmission technology isn't the only way BMW improves
both Dynamics and Efficiency. Among many other factors, BMW also strategically
applies weight-saving materials so as to enhance - you guessed it - Dynamics
and Efficiency. Some examples here are fascinating:
Weight-saving engines. All but one current BMW engine has weight-saving basic
construction materials: aluminum cylinder block and heads for V-8, V-12 and
some 6-cylinder engines; unique new magnesium/aluminum composite construction
in the newest 6-cylinders. Also in the latest engine designs, detail
innovations include hollow camshafts and magnesium or aluminum ancillary
components. Thermoplastic induction systems also reduce engine weight in some
models.
Aluminum body construction. The entire front-end structure of all 5 and 6
Series models; aluminum hood and front fenders on the 7 Series. Of course
aluminum saves weight in an absolute sense; but by applying it at the front
end, BMW improves front-to-rear weight distribution and thus optimizes vehicle
handling.
Aluminum suspension components. Here too, weight is saved in an absolute sense.
But Dynamics benefit too: relatively light moving parts in the suspension
system handle bumpy road surfaces better, improving handling and riding
comfort. Also, to optimize weight distribution in some models, aluminum
suspension components are used at the front but not the rear.
Carbon fiber roof. This brand-new development, appearing for the first time on
the new M6 Coupe, also reduces overall weight. But by specifically reducing it
at the top of the vehicle, BMW M - the racing and performance division of BMW -
has lowered this super-performance automobile's center of gravity. For Dynamics.

Such advanced and carefully targeted technology helps BMW to achieve an
impressive blend of Efficiency and Dynamics right across its line, which in
2006 encompasses 30 models. The accompanying table Efficient Dynamics today
quantifies, relative to a wide range of competitors, the achievements of BMW's
current vehicles in terms of 0-60 mph acceleration and EPA mileage ratings.

An impressive improvement:
BMW's "carbon burden"
Environmental Defense is a U.S.-based nonprofit organization 1 with some
400,000 members. An August '05 report issued by the group examined issues of
climate change, greenhouse gases (mainly carbon dioxide, or CO2) and the role
of motor vehicles in "global warming."

The report analyzes motor vehicles' contribution to greenhouse gases in terms
of "carbon burden" - a way of measuring the annual average CO2 emissions over
the life of a group of vehicles - and highlights new-vehicle CO2 emissions by
automaker for the 1990-2003 period.

In this report, BMW's achievements on the environmental front are expressly
recognized: "With its product mix of upscale fast cars, BMW's CO2 emissions
rate was above the market average in the early 1990s even without trucks. Yet
BMW's CO2 emissions rate saw the biggest reduction among all major automakers,
reflecting notable fuel-economy improvements across its lineup. The company cut
its new fleet-average CO2 emissions rate by 13% between 1990 and 2003, even
with the X5 Sports Activity Vehicle (introduced in 2000) contributing more than
15% of its sales and while achieving a nearly fivefold increase in overall U.S.
sales."

In light of other carmakers' evolution in carbon burden, BMW's achievement is
all the more impressive:
Manufacturer Change in CO2 emissions rate
(-) = reduction, (+) = increase
BMW Group -13%
Volkswagen (incl. Audi) -3.3% (lowest average CO2 emissions rate)
Toyota (incl. Lexus & Scion) +2.9%
Honda (incl. Acura) +5.7% (but overall fuel-economy leader)
DaimlerChrysler +6.8%
General Motors +6.3% (largest overall carbon burden)
Nissan (incl. Infiniti) +8.4%

The future:
innovative new BMW concepts for even greater Efficiency
and more enjoyable Dynamics
With its tradition of Efficient Dynamics and its impressive current
achievements in combining operating efficiency with strong and enjoyable
performance, BMW is not about to rest on its laurels. Indeed, BMW has launched
a new, future-oriented project: BMW EfficientDynamics, running these two key
words together in the contemporary style, and its companion concept BMW
CleanEnergy, the company's vision for sustained mobility.

BMW EfficientDynamics
In its newest quest for an even more intense combination of Efficiency and
Dynamics, BMW has established the BMW EfficientDynamics Project to accomplish
further reduction of fuel consumption and emissions in the future. But as a
premium manufacturer, committed in particular to the development and production
of trend-setting powertrains, the BMW Group is not content merely to achieve
better fuel economy and lower emissions; instead, BMW intends to achieve these
goals while delivering even more dynamic performance and driving enjoyment to
its customers. A central tenet of this project is that BMW's progress not be
limited to small niches in a manufacturer's product line. To put this another
way, a few percent less fuel consumption throughout the model lineup is more
beneficial to the public than a significant improvement in a single market
niche; BMW is focusing on the quickest possible use of new technology to
achieve such across-the-board progress.

Concepts that will appear in BMW vehicles of the future include:
High Precision Injection. In the past 30 years, fuel injection has advanced
from appearing only on sophisticated, performance-oriented engines to a
universal feature of motor vehicles. As it has evolved, fuel injection has
helped automakers achieve leaps and bounds in terms of performance, fuel
efficiency and clean exhaust. BMW has been a leader, introducing fuel-injected
gasoline engines 2 as early as 1971 3 and standardizing fuel injection across
the board in '77.

Fuel-injection technology has come a long way since that early mechanical
system; it's always electronically controlled now, and steadily getting better
for performance and fuel economy. Yet with High Precision Injection, BMW is
aiming at a standard of excellence never before seen. HPI will reduce fuel
consumption under typical driving conditions by 5-15% - this beyond the
improvement already delivered by Valvetronic. Unlike most fuel injection, which
sprays fuel into the intake ports before the cylinders, HPI injects it directly
into the cylinder; and for the first time BMW engineers have been able to make
such a direct injector function with a "lean" fuel/air mixture over the entire
range of operating conditions. (Lean means relatively little fuel for the
quantity of air being used by the engine.) HPI requires sulfur-free gasoline,
which is not yet widely available in the U.S.

Brake Energy Regeneration. A feature already found on hybrid vehicles, this can
be applied equally well to a fully gasoline-powered engine - and like HPI it
can be implemented across a wide range of models relatively soon.

Some of the energy normally lost as heat in the brake discs can be recovered
via an intelligent alternator control concept. Whenever the driver releases the
accelerator pedal, the car's kinetic energy is converted by the alternator into
electrical energy and fed into the battery. Stored in this way, the energy is
now available in the vehicle's electrical network; the alternator requires less
engine power to drive it, leaving more for performance and reducing overall
fuel consumption.

Auto Stop/Start. Also a feature of current hybrids, this system automatically
switches off the engine when the car comes to a standstill. Then, as soon as
the driver depresses the clutch pedal or steps on the "gas," the engine starts
again, automatically and almost instantly. Via the intelligent electronic
control that is part of the system, the engine stops only when it is truly not
needed.

BMW Active Hybrid. Hybrids are of course much in the news - and the sudden
darling of many environmentally aware people. BMW is obviously not first with
this technology; but it's an axiom that first is often not best. In a recent
test report on a popular hybrid model, a U.S. auto-magazine staffer commented
that it is "almost as much fun as any car with no power and tiny tires; that
is, not much."

Consistent with its core philosophy, BMW is taking longer to introduce hybrid
power so that it can fulfill the BMW promise of The Ultimate Driving Machine.
In other words, a BMW hybrid will not be a car with no power and tiny tires!

For the nearer future, the BMW Group is evaluating the BMW Active Hybrid Drive
concept for high-performance vehicles on the basis of an Active Transmission
and Super Cap technology.

Remarkably, within the same dimensions as a current 6-speed automatic
transmission - a feature available on most current BMW models - the Active
Transmission supplements the conventional transmission by adding an electric
power unit with integrated power electronics. This electric unit, which
functions as a generator, motor and starter, replaces the torque converter 4.
Engine ancillaries, such as the power-steering pump, brake booster and
air-conditioning compressor, are driven electrically from a high-capacity
onboard electrical system.

Electrical energy for this system is stored in the vehicle in so-called Super
Caps (i.e., Super Capacitors), and called up to boost performance briefly under
certain driving conditions; the electric power functions much as a turbo- or
supercharger, adding to the combustion engine's output. A dual-function
automatic clutch, similar in operation to the single clutch employed in the BMW
M5's 7-speed Sequential Manual Gearbox, is included for idling and starting off
from rest.

And in starting off from rest, the electric motor, which develops its maximum
torque right at zero rpm, ideally complements the combustion engine, which
delivers its maximum torque much further up the rpm scale: in the 3000/4000-rpm
range for most current BMW engines.

At the 2005 Frankfurt and Tokyo International Auto Shows, BMW displayed a
prototype embodying the system. Called the X3 EfficientDynamics Active Hybrid,
this X3 gets an additional 40 hp from its electric power unit; the Super Caps
are in the X3's side sills (rocker panels), so that they don't require the
extra space needed by current hybrid vehicles' battery packs. Compared to the
standard X3, BMW projects that the Active Hybrid system will improve fuel
efficiency by approximately 10%. That's the Efficiency; on the Dynamics side,
the X3 - its 6-cylinder gasoline equipped with High Precision Injection - is
projected to accelerate from 0 to 62 mph in just 6.7 sec. The current X3 3.0i,
powered by a conventional 3.0-liter 6-cylinder engine and 5-speed automatic
transmission, accomplishes the 0-60 sprint in 7.9 sec.

Earlier, BMW had built an X5 prototype with the Active Hybrid system. Germany's
authoritative auto motor und sport magazine drove it for a May 12, '04 report.
"It's more than impressive how the Hybrid X5 accelerates. When the driver
presses the pedal, it takes off without hesitation, accompanied by a quiet hum
from the electric unit." Initial acceleration is said to be up to 40% better
than without the electric boost.

"This effect is also noticeable at middling speeds," continued the report;
"Said to boost response by up to 50%, the system produces vehement
acceleration." The Super Caps, which are dual-layer capacitors, deliver very
high power for short periods of time and then are quickly recharged. Except for
the initial launch from rest, they do not provide for full electric drive.

Recently, BMW has joined with DaimlerChrysler and General Motors in a joint
venture for the development of hybrid power concepts. The three companies are
expected to invest $100 million or more in the project, which will be in
addition to the developments and projects described here. The technology to be
developed will be of the so-called "2-mode" type," which allows electric-only
operation under some city-driving conditions and uses its electric motors to
boost highway performance. For BMW, a primary goal is to combine this hybrid
technology with true BMW performance: "The creation of a shared technology
platform for hybrid drives will allow us to more quickly integrate the best
technologies on the market and will therefore exploit and strengthen the
innovative potential of all participating companies," explains Prof. Burkhard
Göschel, Board of Management member for Development and Procurement at BMW AG.
"Because the technologies will be adapted to the individual vehicle models, the
participating brands will retain their distinctive characters."

Coming sooner?
A time-honored concept in new-age form: the diesel engine
Because of a confluence of factors - until recently very inexpensive motor
fuels in general, high-sulfur diesel fuel in particular, and
difficult-to-fulfill emission standards - diesel-powered automobiles have
remained a rarity in the U.S. This may change soon.

Time was when diesel-powered cars were slow, noisy, and smelly. Those times are
long past: In Europe today, diesels take nearly 50% of the passenger-car/SUV
market, and contemporary automotive diesel engines are amazingly powerful and
quiet. In particular, they "pull" very strongly at low speeds, a practical sort
of power for the driving many people do much of the time; and they have a
fundamental advantage in fuel economy.

In the European market, BMW offers a wide range of diesel-powered models, from
the 2.0-liter, 4-cylinder 118d (122 hp) to the 4.4-liter, V-8 745d (300 hp);
Sports Activity Vehicle models include the X3 3.0d (3.0-liter 6-cylinder, 204
hp) and X5 3.0d (3.0 liters, 218 hp).

According to European auto media, the blockbuster among BMW diesels is the
535d. Applying an innovative dual-turbocharger concept to its 3.0-liter
6-cylinder engine (as in the X3 and X5), the company has created a true
performance diesel. Providing dramatically strong performance all the way up to
5000 rpm - high for a diesel - this mighty powerplant delivers no less than 272
hp. Testing the 535d Touring - a body style called Sports Wagon in the U.S. -
Switzerland's also authoritative Automobil Revue measured its acceleration
from 0 to 100 km/h (62 mph) in 6.1 sec., and raved: "Astounding how the
6-cylinder diesel pours it on, and it's seldom necessary to use more than 2500
rpm. The power flow is homogeneous. In connection with the 535d, you can forget
words like "turbo lag" and "slow off the line."

And when its test was done - including of course some high-speed driving on
speed-unlimited Autobahnen over in Germany - the Swiss paper reported an
overall fuel economy of 27.4 mpg for the roomy 5 Series wagon. Gentle highway
driving netted 35.1 mpg - and this is a vehicle that does 0-60 mph in just 6
sec.! Comparing these results with a competitor's similarly sized and priced
gasoline-powered performance wagon, the bi-weekly found that the BMW diesel
achieved fully 11 mpg better overall fuel economy during its tests. This is
evidence not only of the remarkable diesel technology produced today by BMW,
but also the fundamental fuel-efficiency advantage of diesels.

In the not-too-distant future, BMW may be able to offer U.S. customers - and
yes, performance-oriented U.S. customers - such sophisticated, desirable diesel
performance and fuel efficiency. Lower-sulfur diesel fuel is coming; in turn,
the cleaner fuel will make it more feasible to meet tough emission standards.

And just to think a bit further: the fuel-efficiency advantage of diesel power
can be combined with some of the innovations described earlier: Brake Energy
Regeneration, Auto Stop/Start, Active Hybrid, other future hybrid concepts that
the joint venture will develop.

CleanEnergy:
BMW's vision of sustained mobility
Going beyond the developments already described, BMW's CleanEnergy concept
seeks to ensure individual mobility in the longer term, at the same time
reducing motor vehicle emissions in general and CO2 emissions in particular.

Hydrogen is acknowledged by experts worldwide as the most appropriate energy
carrier for motor vehicles - in the long run, that is. In this context, the BMW
Group has been pursuing hydrogen research and development for decades; indeed,
BMW has become the world's leader in the practical application of this ultimate
"clean fuel" to motor vehicles. BMW's hydrogen technology employs liquid
hydrogen as a fuel in internal-combustion engines.

In September '04, BMW convincingly demonstrated its advanced state of
development in hydrogen power by setting no fewer than nine international speed
records for hydrogen-driven vehicles with the BMW H2R research vehicle on its
high-speed test track in Miramas, France. This unique prototype is powered by
a 6.0-liter V-12 engine that develops approximately 285 hp; among the records
it set was 186.11 mph for the "flying-start" kilometer - that is, timed over a
kilometer after accelerating to something near its maximum speed. On a more
down-to-earth level, a limited-production 7 Series model capable of running on
hydrogen or gasoline is being developed.

Yet for widespread use of hydrogen as a motor fuel, "long run" is a necessary
caveat. Even though hydrogen can be generated cleanly from solar, wind and
hydroelectric energy sources, the infrastructure for its production,
distribution, and storage in the vehicle requires lengthy and intense technical
and commercial development. The BMW Group is strongly committed to this
pursuit, even while also concentrating on the nearer-range technologies already
described.

No company is able to introduce hydrogen as the "fuel of the future" solely on
its own resources. With this reality in mind, the BMW Group has initiated
appropriate joint ventures. Prominent among these is the Economic Transport
Energy Strategy, launched with the support of the German government in May 1998
and now comprising ARAL/BP, DaimlerChrysler, MAN, Opel, RWE, Shell, TOTAL and
Volkswagen as well as the BMW Group.

This venture's main objective is to work together in preparing a strategy for
the introduction of alternative energy and drive systems. Other major targets
are to make the world transport system less dependent upon oil; to preserve
finite resources; to further reduce emissions including CO2, and to expand the
initiative to encompass all of Europe. In another significant CleanEnergy
venture, the BMW Group plans a wide range of activities in China related to
introduction of hydrogen as a primary source of future energy for that large
and growing economy.

Fuel-cell APU. BMW's hydrogen concept also involves the use of a fuel cell, not
to drive the vehicle directly but rather to generate electricity for vehicles'
onboard use. The fuel-cell-powered APU (Auxiliary Power Unit) promises a higher
degree of efficiency than is possible with engine-driven generation (currently
via an alternator), and has the additional advantage that air conditioning,
heating and other vehicle ancillaries can be operated with the engine off.

Toward the distant future, while working intensely on the present and near
future
All these thrusts of the BMW Group's activities demonstrate BMW's commitment to
seeking solutions that truly work - solutions for now, tomorrow and the day
after tomorrow. BMW is intensely developing solutions that address the need to
conserve fossil fuels; protect the environment; and not incidentally, continue
to deliver on BMW's traditional promise: The Ultimate Driving Machine.