BMW has joined rivals Audi and Mercedes-Benz with plans to build a car factory in Mexico as low wages and global expansion take precedence over the exclusivity of a “Made in Germany” stamp.
The company said on Friday that the $1 billion (R10.7bn) plant in the state of San Luis Potosi would be BMW’s second in North America when production started in 2019.
The plant’s capacity to build 150 000 vehicles a year would increase production in the region to as many as 600 000 cars, or about 30 percent of this year’s sales goal.
With the new assembly facility, “the BMW group will be even better positioned to take advantage of the growth potential” in North and South America, Harald Krueger, the vehicle manufacturer’s production chief, said.
“We are continuing our strategy of ‘production follows the market’.”
The biggest manufacturer of luxury cars will be the last among the German rivals to make vehicles in Mexico, where labour costs are about 20 percent of US levels.
Daimler’s Mercedes-Benz will start joint production in 2017 with Nissan Motor’s upscale Infiniti unit in Aguascalientes. Volkswagen’s Audi division will begin assembling vehicles in San Jose Chiapa in 2016.
Mexico’s free-trade agreements with the US, South America and Europe were critical to the plans.
“Mexico’s location facilitates exports to North America as well as South America, which we think will be a future growth market,” Frank Biller, an analyst at LBBW based in Stuttgart, Germany, said before the announcement by the car maker.”If a cluster of car makers starts production in Mexico, this will create a local industry.”
Automotive production in Mexico advanced 7.2 percent to 1.31 million vehicles during the first five months of this year, on track to top last year’s record output of 2.93 million, according to the Mexican Automobile Industry Association (Amia), a trade group that represents vehicle manufacturers.
Plants in Mexico would probably build about 3.1 million vehicles this year following factory openings during the last eight months by Nissan, Honda Motor and Mazda Motor, Amia president Eduardo Solis said last month.
General Motors, the largest US car maker, has been building cars in San Luis Potosi state since 2008, according to its website.
The new factory investments by BMW, Mercedes and Infiniti, were bolstering Mexico’s global role as a luxury-car manufacturer, Mexico’s President Enrique Peña Nieto said on Friday.
BMW’s 3-Series may be among the vehicles made at its Mexican plant, according to Economy Minister Ildefonso Guajardo.
BMW said that it would decide later what models to build there. - Bloomberg