A giant BMW Mexican investment worth about $1 billion was announced by the German luxury car manufacturer yesterday, adding to the number of automakers interested in Mexico’s expanding industrial base and tax-free access to American consumers.
The BMW Group says it will build a new factory near the city of San Luis Potosi, which it says is in line with its drive for globally-balanced growth.
BMW is the latest in a string of companies to invest in Mexico’s expanding auto market. Mexico is currently the fourth largest vehicle exporter worldwide. Major multinationals, such as General Motors, Nissan and Volkswagen have major production plants in the country. Foreign direct investment into Mexico is now at a record high.
Production to start in 2019
Harald Krüger, member of the BMW AG Board of Management, in charge of Production, said:
“Mexico is an ideal location for the BMW Group and will be another important plant within our production network. We will invest one billion US dollars in the new production site over the next few years. Production is planned to start in 2019 and during that year, the workforce will reach around 1,500 people.”
The Munich-based company says several thousand jobs will be created locally over the medium term. It has not yet announced which BMW models will be build at San Luis Potosi.
Mr. Krüger says the BMW Mexican investment underscores the automaker’s commitment to the NAFTA (North American Free Trade Agreement) region.
The company has been building luxury cars at its US plant in Spartanburg for the last twenty years. With the estimated 150,000 units-per-year capacity of the new Mexican plant “the BMW Group will be even better positioned to take advantage of the growth potential in the entire region. The Americas are among the most important growth markets for the BMW Group. We are continuing our strategy of ‘production follows the market’,” he added.
Harald Krüger together with Mexican President Enrique Peña Nieto at the announcement of the plant in Mexico.
Mexico’s competitive location
BMW sees several advantages in choosing Mexico to build a new plant. The country:
- is within the NAFTA area. From Mexico, manufacturers can export goods into the US without paying tariffs,
- has trade agreements with the European Union,
- has trade agreements with the MERCOSUR states,
- has a rapidly-growing industrial base with a solid network of established suppliers and well-developed infrastructure,
- has a highly-qualified workforce with much lower labor costs than at home or in the US. According to Bank of America, Mexico today is more competitive than China.
BMW in Mexico since 1994
The BMW Group says it has purchased products worth about $1.6 billion from Mexican suppliers over the last year; suppliers with whom it has had good relations for several years, the company added.
In 2013, BMW sold 13,992 cars in Mexico, where it has operated a local sales company since 1994. Car sales rose by 18% and motorcycle sales by 16.6% in the country last year.
BMW’s other investments
In March 2013, the BMW Group announced a $1 billion investment at its plant in Spartanburg, South Carolina, United States. Production at the plant, which will become its largest worldwide, will increase by 50% to 450,000 vehicles annually by 2016.
BMW plans to reduce its dependence on the fragile European markets, which last year accounted for 44% of total revenue.
An additional $200 million will be invested in Moses Lake, Washington, to expand a joint venture carbon fiber plant. The investment will triple the plant’s production capacity, making it the largest carbon fiber manufacturing facility worldwide.
Over the next five years, the BMW group will invest about $2.2 billion in the NAFTA region.
A factory is currently being built in Santa Catarina, Brazil, where production is expected to start by the end of 2014.
The BMW Group wrote:
“With plants in the US, Mexico and Brazil, the BMW Group will have extensive production capacity at key locations in North and South America.”