BMW will expand production of its bestselling vehicle, the 3-Series sedan, to North America when it opens its newest plant an hour north of Mexico City in 2019.
The German automaker broke ground at its San Luis Potosí plant on Thursday and announced plans to invest $1 billion in the state-of-the-art facility. The 3-Series will continue to be built in Germany as the plant ramps up to an annual capacity of 150,000 units. BMW’s South Africa plant, which also makes the 3-Series, will switch to the X3 crossover once the Mexico factory opens.
Mexico is becoming North America's car capital, as global automakers have flooded to the region, attracted by liberal trade agreements, cheap labor rates and a well-educated workforce.
“Mexico is a growing market with promising dynamics,” Oliver Zipse, BMW’s head of production, said at a ceremony attended by local government officials including Dr. Juan Manuel Carreras López, Governor of the state of San Luis Potosí, and Jose Rogelio Garza Garza, Undersecretary of Industry and Commerce at the Mexican Ministry of Economics. “As a NAFTA country, it has direct access to a region with a considerable growth potential for premium mobility.”
Building the 3-Series sedan, which sold 94,540 units last year, could be an auspicious starting point for the new plant. The automaker’s largest plant, in Spartanburg, S.C., also cut its teeth on the sedan when it opened 22 years ago. Now it makes BMW’s crossovers and SUVs – the X3, X4, X5, and X6 – and will build the X7 three-row SUV, which will reach showrooms in 2018.
Mexico is a growth market for BMW; sales for BMW and its MINI brand have climbed 13% so far this year, on top of a 17% gain last year. As the world’s fourth-largest automotive exporter, the country is also home to several plants operated by other automakers, including General MotorsGM +0.19%, Volkswagen, Ford, Nissan, Daimler , Toyota, Honda, Kia, Mazda, and Fiat Chrysler. Economic development officials expect Mexico to manufacture more than 5 million cars in 2020, compared with 3.4 million last year.
“Mexico is a symbol for the benefits of free trade,” Zipse said. “Visionary politics have made Mexico the number one country in the world when it comes to free trade agreements.”
The 3-Series, which debuted in the U.S. in 1975, outsells all other small luxury sedans, including the Mercedes-Benz C-class and Lexus ES. It has set the benchmark for the segment because its performance and styling have remained consistent over the past four decades, said Ed Kim, vice president of industry analysis at automotive research firm AutoPacific.
“BMW has never drastically changed the 3-Series’ focus in terms of messaging and execution, and so it remains in the customer’s mind the quintessential driver’s sedan,” Kim said. “It’s noteworthy that while the BMW lineup has expanded in many directions over the years, the 3-Series remains the heart of BMW. It sets the tone for the entire brand.”
Together, BMW and MINI reached record sales in the U.S. last year, selling 404,537 vehicles, but the company’s performance has been weaker this year, falling 10% through last month. That’s partially due to a decline in sedan sales, including of the 3-Series, as consumers’ appetite for crossovers increases. “Crossover SUV share has been climbing through the roof in the luxury market,” Kim said. “Buyers are leaving sedans in droves in favor of SUVs.”
At the Spartanburg plant, where BMW is investing another $1 billion to raise its crossover capacity to 450,000 units, managers are auditioning robots for a range of jobs, from transporting parts to releasing the car from the assembly line. The plant is also testing a 14-pound exoskeleton that workers wear like a backpack. During my visit this week, I watched the Iron Man-esque device, designed to advance safety and reduce shoulder, neck and wrist fatigue, support a worker’s arms as he reached overhead to install underbody panels and heat shields on a procession of X3 crossovers. If the robots pass the trial tests, BMW will roll them out across its plants.
The exoskeleton has military and medical applications but hasn’t been used in automotive production, according to BMW Planning Engineer Frank Pochiro: “I discovered it on a TED talk.”