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BMW's innovative i8 is a plug-in hybrid sports car that combines superb performance with spectacular fuel economy. It's a tremendous product. But the key executives behind it have left BMW to join a Chinese start-up. Image source: BMW.

BMW (NASDAQOTH:BAMXF) has lost the core development team behind its i3 and i8 electric vehicles to a well-funded Chinese start-up, according to multiple reports.

The Wall Street Journal and Bloomberg were among those reporting on Tuesday that several key executives responsible for the "BMW i" electric-car group have left the company to join Future Mobility Corporation, a new Chinese company backed by several major investors. 

It's a big coup for Future Mobility and its backers, which include Asian Internet giant Tencent Holdings and Taiwanese contract-manufacturer Foxconn, among other big names. 

But what does it mean for BMW?

The key players behind BMW's "i" vehicles have moved on
Carsten Breitfeld, a 20-year BMW executive who led development of the i8 plug-in hybrid sports car, let the company last month to become Future Mobility's CEO. Now, reports say, three key executives from the BMW i team are joining him: Dirk Abendroth, who led powertrain development, Benoit Jacob, the BMW i head of design, and Henrik Wenders, who led BMW i product management. 

BMW hasn't said what's going on. But the departures follow rumors that BMW, which was once seen as a likely leader in electric cars, has downgraded its EV efforts.

BMW put the innovative i3 into production in early 2013. The car is a compact sedan marketed as a "city" vehicle. Its construction features a lot of carbon fiber, and BMW developed a whole new assembly process to build the vehicle. The i8, the sports car that followed the i3, is a plug-in hybrid that also features a great deal of carbon fiber in its production -- and that delivers exhilarating sports-car performance with exceptional fuel economy. 

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BMW i3. The affordable electric sedan has won high praise from critics. Image source: BMW.

Both BMWs were widely praised by critics, and in the wake of their launches BMW was seen as a likely leader in the industry's transition to electric powertrains and more advanced vehicle-construction techniques. 

But as with most electric vehicles made by companies that aren't Tesla Motors (NASDAQ:TSLA), sales of the BMW i models -- the i3 in particular -- haven't really lived up to optimistic expectations. While both models have been successful by the standards of their market segments, it appears that BMW's ardor for electrified vehicles has cooled considerably in the wake of the i8's launch. 

BMW CEO Harald Krueger said recently that the next vehicle in the i series, thought to be a mainstream sedan or SUV, won't appear before 2020. For engineers and designers excited by developments at Tesla and other companies, that's a long, long wait. That may be why key members of the BMW i team departed for a start-up.

The lesson for the industry: Push ahead with EVs or risk losing out
The lesson for the rest of the auto industry is this: BMW was positioned to be an electric-car leader -- but it cut back on its efforts, and lost key talent as a result. Meanwhile, BMW archrival Daimler (NASDAQOTH:DDAIF) is making a well-funded electric-car push -- as is giant Volkswagen Group (NASDAQOTH:VLKAY) with electric-vehicle efforts at its Audi and Porsche brands. Both German luxury giants are scrambling to stake out turf in the premium EV market segments currently owned by Tesla (as they should be). But BMW appears to have backed away.

The reality is that electric cars are probably going to be money-losers for all of the big automakers in the near term. But they'll be important products eventually -- and in the meantime, the best electric-car developers will be drawn to the companies doing the most exciting work. These defections may well haunt BMW in a few years.

John Rosevear has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool recommends BMW. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.