BMW to spend $1 billion to build new site in San Luis Potosi, Mexico

Article by Christian A., on July 6, 2014

BMW is planning to invest $1 billion to build a site in San Luis Potosi, Mexico that could produce around 150,000 units annually and have a workforce of around 1,500 people. Production operations are bound to start in 2019, disclosed Harald Krueger, BMW board member for production.

Krueger said in a statement that the new San Luis Potosi site, along with BMW’s plant in Spartanburg, South Carolina, underscores the carmaker’s commitment to the North American Free Trade Agreement region. He noted that the Americas are among the most important growth markets for the BMW Group, adding that the carmaker is continuing its strategy of “production follows the market.”

The disclosure comes after rival Daimler and Renault-Nissan announced plans to build a $1.36-billion site in Aguascalientes, Mexico, to produce compact vehicles for their Infiniti and Mercedes-Benz brands.

BMW’s announcement was done at the residence of President Enrique Peña Nieto of Mexico. He was joined by Secretary of Economy Ildefonso Guajardo Villarreal and the governor of San Luis Potosi state, Fernando Toranzo Fernández.

According to BMW, large number of international free trade agreements of Mexico was a decisive factor in the choice of location. BMW also said that it chose Mexico due to the quality of the work force, a supplier network the carmaker has been sourcing parts from, and infrastructure.

Krueger remarked BMW has already reached initial agreement with worker representatives in San Luis Potosi. BMW has over 100 suppliers in Mexico, Krueger said, adding that there will be more supplier opportunities in the future.

Andreas Klugescheid, corporate and government affairs head of communications for BMW's production network, told Automotive News that supply sourcing in Mexico reached $1.61 billion in 2013.

Renault-Nissan’s planned site in Aguascalientes, Mexico, will be building Infiniti’s premium vehicles starting in 2017, and Mercedes-Benz luxury offerings in the following year. The new manufacturing facility in Aguascalientes is expected to add around 5,700 jobs. When fully ramped up, Renault-Nissan new site will an annual capacity of 300,000 units by 2021.

There have been reports saying that Daimler would produce the Mercedes GLA crossover in the Aguascalientes site as part of a joint venture with Nissan. Daimler executives, however, told Manager Magazin that the next-generation CLA and a new A-class sedan variant are ones that will be produced at the site.

German luxury carmakers have been eyeing Mexico as an ideal production location as the country offers several advantages. For instance, Mexico is geographically close to the US and offers a cheap yet skilled workforce. In addition, Mexico is a signatory to a number of free trade accords.

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Topics: bmw, mexico, plant, investment

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