(Adds statement from Kia)
By Alexandra Alper
MEXICO CITY, July 3 Luxury car maker BMW
revealed a $1 billion Mexican plant investment on
Thursday, becoming the latest major automaker to take advantage
of the country's growing industrial base and tariff-free access
to the U.S. market.
BMW outlined plans to build a factory in the central Mexican
city of San Luis Potosi, reducing the German company's
dependence on higher-cost plants at home.
The plant will begin assembling models in 2019 with an
initial workforce of 1,500 and annual production capacity of
150,000 vehicles, the company said.
"Mexico is an ideal location for the BMW Group," production
chief Harald Krueger said in a statement. "We are continuing our
strategy of 'production follows the market.'"
Germany's luxury car makers - BMW, Audi and
Mercedes-Benz - are expanding overseas as their
domestic plants struggle to meet strong demand for new vehicle
offerings in the United States and Asia.
"With this investment, Mexico is stepping up to
premium-level production of global vehicles," Mexican Economy
Minister Ildefonso Guajardo said as the plant was announced.
BMW did not reveal what type of vehicle it will build, and a
spokeswoman for the company said no decision had been made. But
several Mexican and European officials at the presentation said
they believed the plant would produce 3 Series cars.
"At some point I heard that they were talking about the 3
Series," Guajardo told reporters after the event. "But I don't
have the official confirmation."
Guajardo added that at least one other big auto investment
would be announced this summer but did not elaborate. Reuters
reported last month that Kia Motors Corp plans to
break ground soon on a new plant in Mexico.
"Mexico is being considered as a possible location of our
next overseas production facility," Kia spokesman Michael Choo
said in a statement, adding that the company faced a "supply
shortage situation in the Americas region."
Mexico's auto sector is gaining critical mass as more global
brands open production lines, boosting the supplier network.
BMW's move comes days after Daimler announced new Mercedes
production in Mexico with partner Nissan Motor Co Ltd,
which already operates two plants in the country where it had
recently increased capacity.
"The premium brands are finally realizing that Mexico has
the capacity to build signature vehicles," IHS Automotive
analyst Guido Vildozo said.
"We are going to see all these plants starting with one or
two products at the very beginning, but they will gradually
become critical pillars of profitability for the premium
manufacturers," he added.
Mexico benefits from tariff-free exports to the United
States as well as Europe, while its factories are beyond the
reach of the United Auto Workers union, which has been
struggling to boost its influence in the U.S. South.
BMW's investment comes amid a domestic industrial cost
review that has some German unions worried about their
longer-term outlook, as the company reduces reliance on sluggish
European markets that still account for 44 percent of sales.
The plant also increases BMW's bet on the United States,
which is the world's largest luxury-car market along with China.
In March, BMW announced a $1 billion investment to expand
capacity by 50 percent at its plant in Spartanburg, South
Carolina, where it builds a range of sport utility vehicles.
(Additional reporting by Gabriel Stargardter and Luis Rojas in
Mexico City, Edward Taylor in Frankfurt and Laurence Frost in
Paris; Editing by Matthew Lewis, Meredith Mazzilli, Tom Brown
and Lisa Shumaker)