BMW to invest $1 billion to expand U.S. production by 50 percent

FRANKFURT Fri Mar 28, 2014 1:54pm EDT

1 of 3. A BMW employee works on the door assembly for the X4 at the BMW manufacturing plant in Spartanburg, South Carolina March 28, 2014.

Credit: Reuters/Chris Keane

FRANKFURT (Reuters) - BMW (BMWG.DE) will expand production capacity in the United States by 50 percent and introduce an X7 offroader, the company said on Friday, in what amounts to a $1 billion bet on sports utility vehicles.

These large offroaders have steadily gained popularity in recent years, leading BMW to revive plans to make the X7 a sports utility vehicle (SUV) with three rows of seats.

Overall SUV's account for 32 percent of U.S. vehicle sales in 2013, up from around 19 percent in 1999, statistics supplied by LMC Automotive show.

BMW's factory in Spartanburg, South Carolina will ramp up annual production capacity to 450,000 vehicles by 2016, in a move which cuts the German auto maker's dependence on fragile European markets, which accounted for 44 percent of group sales in 2013.

The United States is BMW's second largest national market, accounting for 19 percent of group sales in 2013, behind China with 20 percent of sales. Germany, BMW's home market, accounts for 13 percent of the auto maker's sales.

Spartanburg started out making BMW's 3-series sedans. Today, it makes offroaders, producing 300,000 in 2013 including the X3 compact offroader as well as the X5 and X6 models.

Reuters last week reported BMW planned to build the X7 in South Carolina.

The appetite for large sports utility vehicles has been mirrored by a fall in fuel prices, as the U.S. increased fracking, a technique to extract oil and gas by drilling tightly packed shale rock.

In 2019, U.S. domestic production of crude oil will account for 63 percent of total supplies, according to the Energy Information Administration, a significant increase from 2011 when it barely covered 38 percent of the country's needs.

(Reporting by Edward Taylor and Benjamin Klayman; Editing by Chris Steitz and Maria Sheahan)