BMW Planning $1 Billion Plant in Mexico
BMW plans to spend about $1 billion to develop a new factory in Mexico, looking to match two of its biggest competitors, sources have told Bloomberg.
BMW is expected to formally announce its plans for the facility on July 3, said Mathias Schmidt, a BMW spokesman.
The Mexican plant will be built in San Luis Potosi, which is about 250 miles northwest of Mexico City, and will produce around 150,000 cars per year. Production is slated to start by 2019, sources say.
BMW, which also makes Mini and Rolls-Royce vehicles, is the last of the world's three-largest luxury auto brands to build a plant in Mexico, Bloomberg reports. The company also has a plant is Spartanburg, S.C.
Daimler AG, which makes Mercedes-Benz vehicles, last week revealed that it would be developing a plant with Nissan Motor Co.'s Infiniti brand in Aguacalientes, Mexico. Production in that facility will start in 2017.
Volkswagen AG previously announced a planned facility to make its Audi vehicles in San Jose Chiapa by 2016.
"BMW can't afford to compete with Mercedes and Audi at a labor-cost disadvantage," Erik Gordon, a professor at the University of Michigan's Ross School of Business, told Bloomberg. He added that the luxury brands are taking a big risk in a country that has little history of making luxury cars.
Mexico is attractive to the automakers because of the low labor costs and ease of supply to the U.S. and Canada, MarketWatch reported. Labor costs in Mexico are about 60 percent lower than in the U.S., according to a study done by KPMG, and some analysts claim that costs in Mexico could be lower than in China.
Mexico is also ahead of China in transportation costs to the U.S. and Canada, two major markets for the luxury automakers. The country's seaports on the Gulf of Mexico and Pacific coast also open the door to distribution to Asia and Europe.
Mexican President Enrique Pena Nieto is planning an event on Thursday at the presidential palace to celebrate the announcement, MarketWatch reported.