BMW to Decide in Coming Months on New North America Plant – Bloomberg

Posted: Tuesday, April 08, 2014

Bayerische Motoren Werke AG (BMW), the
world’s biggest maker of luxury vehicles, is progressing with
plans for a second North American factory to tap rising demand
for its vehicles in the region.

“We will decide this in the next months,” Harald Krueger,
BMW’s production chief, said in an interview in an internal
publication for staff obtained by Bloomberg News. “On the North
American continent, there’s still potential.”

BMW has been narrowing the list of locations, with at least
two sites in Mexico still being considered, people familiar with
the matter said. The Munich-based carmaker is weighing building
its bestselling 3-Series at the new plant, said one of the
people, who asked not to be identified discussing internal
deliberations.

Chief Executive Officer Norbert Reithofer said last month
that BMW will need an additional factory in the region “at some
point” as part of an expansion to fend off Volkswagen AG (VOW)’s Audi
and Daimler AG (DAI)’s Mercedes-Benz. BMW announced plans March 28 to
spend $1 billion expanding its South Carolina plant, which will
become its largest facility worldwide.

“As part of our long-term growth strategy we’re frequently
looking at different countries for possible locations for future
production,” Mathias Schmidt, a BMW spokesman, said by phone.
“No decisions have been made yet, though, for a new plant in
North America.”

SUV Production

BMW will raise production capacity 50 percent in
Spartanburg, which assembles sport-utility vehicles, by 2016 to
450,000 vehicles and add a large SUV called the X7. The
carmaker’s biggest factory has been in Dingolfing near Munich,
where it produces the 3-, 5-, 6- and 7-Series. The automaker
built 342,000 cars in Dingolfing last year.

BMW posted its best March sales ever in the U.S. and
narrowed the gap to Mercedes, which claimed the top spot in
North American luxury-car sales last year. BMW sold 32,107
vehicles last month, an increase of 19 percent. Mercedes
delivered 27,401 vehicles, an 11 percent gain.

BMW increased U.S. first-quarter deliveries 12 percent to
72,377 vehicles. Mercedes’s sales in the period rose 5 percent
to 72,614, while Audi gained 3 percent to 35,228.The U.S. was
BMW’s second-biggest sales region last year, accounting for 19
percent of global volume.

“Specifically for BMW it makes sense to widen production
in North America, because it’s such a large market for them,”
said Juergen Pieper, a Frankfurt-based analyst at Bankhaus
Metzler. “It helps to produce close to where the demand is.
Currency fluctuations have increasingly become a problem.”

Record Deliveries

BMW, Audi and Mercedes-Benz are all planning record global
deliveries in 2014 on growth in China and the U.S., the world’s
two largest auto markets. All three are adding capacity as
demand outstrips production.

Mercedes announced plans last month to spend 1 billion
euros ($1.4 billion) to double capacity at its Beijing plant to
more than 200,000 autos a year in 2015.

Stuttgart, Germany-based Mercedes, which ranks third in
luxury-car sales to BMW and Audi, makes SUVs at a factory in
Tuscaloosa, Alabama, where it’s adding production of the C-Class
sedan in June. Daimler CEO Dieter Zetsche said last month the
company may set up a new plant in North America to add capacity
as he rolls out 30 new models by the end of the decade, a dozen
of which will have to predecessor.

Audi, which doesn’t yet produce vehicles in the region, is
constructing a $1.3 billion factory in San Jose Chiapa, Mexico,
that’s scheduled to begin building the Q5 SUV in 2016.

Production in North America helps European automakers
reduce exposure to swings of the dollar-euro exchange rate.
Currency shifts may weigh on car-division revenue this year, BMW
said in March.

To contact the reporter on this story:
Christoph Rauwald in Frankfurt at
crauwald@bloomberg.net

To contact the editors responsible for this story:
Chad Thomas at
cthomas16@bloomberg.net
Tom Lavell

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