MEXICO CITY/NEW YORK -- BMW Group executives opened the automaker’s first Mexican assembly plant extolling its value for the coming years, just a week after President Donald Trump made a fresh tariff threat on Mexican goods.
BMW spent about $1 billion on the plant, set in the vast arid plains of San Luis Potosi in north-central Mexico. It’s one of three -- the other two are in Germany and China -- that will produce the next-generation 3 Series sedan for sale in the U.S. and other markets.
The automaker has no reason to change its plans for the site because of the current political climate, BMW board member Oliver Zipse at its inauguration Thursday. The factory will supply more than 40 markets worldwide starting next year and “it would be very speculative to make decisions on short-term announcements,” he said.
The timing comes just days after President Trump threatened to impose a 5 percent tariff on all goods imported from Mexico on June 10, unless that country takes unspecified steps to stop illegal migration from Central America. The levies would escalate every month until reaching 25 percent in October according to the White House plan.
Those tariffs would inflict financial pain on BMW and its newest plant, said Kristin Dziczek, vice president of industry, labor, and economics at the Center for Automotive Research in Ann Arbor, Mich. “It hurts them a lot,” she said. “They’re there because they want to be part of North America, and North America is the U.S.”
'Produce for the world'
With its low wages, free-trade pacts with multiple countries, and proximity to the world’s second-biggest car market, Mexico has lured a raft of automakers from Nissan Motor Co. to Volkswagen Group in recent years. That appeal is unlikely to change over this latest threat, in part because the factory is not dependent only on the U.S. BMW says the San Luis Potosi plant “will produce for the world.”
The plant is meant to primarily supply the U.S. and Mexico, with lesser amounts shipped to Central America and the Caribbean, according to LMC Automotive. It employs 2,000 people and is supposed to ramp up to a maximum capacity of 175,000 vehicles a year, though the pace may slow because of tariffs, according to Juergen Pieper, head of automotive research at Bankhaus Metzler.
A 5 percent tariff would add about $2,000-$2,500 of extra cost per vehicle, which might have negligible impact for a short period of time, but would put the 3 series at a competitive disadvantage against the Audi A4, which is made in Germany, and the Mercedes C-class, produced in Tuscaloosa, Ala., and South Africa, said Jeff Schuster, an analyst with LMC.