BMW will build the next X3 in-house in Germany and the United States or just in the States, supplier and company sources say.
Currently, the premium SUV is built by contract coachbuilder Magna Steyr in Graz, Austria. To offset the loss of the X3, BMW could offer Magna Steyr a contract to build the X4, a sporty, two-door SUV, or another niche model, suppliers say.
The second-generation X3 is due in 2010. Demand for the SUV has exceeded expectations since its launch two years ago.
BMW originally planned to sell 40,000 X3s a year, but Magna Steyr built 112,800 units in 2004, its first full production year.
In an ambitious move, BMW plans a peak annual production of more than 160,000 units for the second-generation X3.
BMW is leaning toward building one-third of the premium SUVs at its plant in Spartanburg, S.C., and two-thirds in Regensburg, Germany.
"BMW aims to produce 50,000 units in Spartanburg and over 100,000 in Regensburg," a source close to the program said.
Building the X3 in both the United States and Germany would minimize BMW's exposure to currency fluctuations. Last year, BMW sold 34,746 X3s in North America and 66,815 units in Europe, according to Automotive News Europe's 2006 Global Market Data Book.
Burkhard Goeschel, BMW's management board member for development and purchasing, declined to comment on where the next X3 will be built.
"We discuss which plants will build our models all the time," he told Automotive News Europe at a BMW event this month. "Magna Steyr is an excellent partner, and we will continue to work with them."
BMW is aiming to operate its plants at full capacity and use coachbuilders to make additional models or handle overflow volume.
BMW produces the Z4 coupe and roadster and the X5 in Spartanburg. In 2008, the plant will add a crossover likely to be called the X6. Moving all X3 production to Spartanburg probably would require expanding the plant.
BMW's Regensburg plant in southern Germany builds the 1- and 3-series models. The factory will have extra capacity because BMW is expected to transfer some 1-series production to its new plant in Leipzig, Germany.
More work coming?
BMW could offer Magna Steyr about 40,000 units a year of a two-door version of the X3 starting in 2010. Magna Steyr also could be contracted to build a convertible BMW model.
There is a precedent for this. Last November, DaimlerChrysler said it would shift production of the four-wheel-drive Mercedes-Benz E class from Magna Steyr's Graz plant to its factory in Sindelfingen, Germany, starting in 2007. DaimlerChrysler, which wanted to boost Sindelfingen's capacity use, extended Magna Steyr's contract to build the G-class premium SUV until 2010.
"We have found a viable solution for both partners," DaimlerChrysler CEO Dieter Zetsche said at the time.
Magna built 54,972 X3s in the first six months, according to J.D. Power Automotive Forecasting.
Suppliers expect the basic plan for where to build the next X3 to be clear by year-end. Magna Steyr is unlikely to get the next generation but has not been entirely eliminated, suppliers say.
BMW invested to help Magna Steyr expand the Graz plant to build up to 80,000 X3 units a year and was pleased when the contract manufacturer managed to squeeze out an additional 33,000 X3 units to meet unexpectedly high demand.
"We are happy to have Magna as a cooperation partner," incoming BMW Chairman Norbert Reithofer told Automotive News Europe in April, when he was in charge of manufacturing.
Magna Steyr CEO Manfred Remmel has said: "We are confident that we will find a solution of mutual satisfaction."
You may e-mail Jens Meiners at [email protected]