SAN LUIS POTOSI, Mexico — As BMW opened its new billion-dollar auto assembly plant in this central Mexican city, its second in North America, the timing couldn't be more inopportune.
Just a week earlier, President Donald Trump tweeted a new plan to impose a 5 percent tariff on all Mexico imports starting June 10 — a stick to nudge the Mexican government to get tougher on "illegal" immigrants streaming across the U.S. border. It wasn't until Friday that the president lifted his threat.
BMW officials here remain bullish about their plans, which have been in motion for years. Oliver Zipse, BMW's global production chief, said the automaker will consider additional investment as the market warrants.
"For us, it's very normal that we have trade restrictions," Zipse told Automotive News after a press event to announce the plant's official opening. "The answer is to go worldwide. We have locations in more than 32 countries to be close to the customer. In a restricted world, it's better to be inside the country than outside."
The San Luis Potosi plant was built with an annual production capacity of 175,000 vehicles to produce the BMW 3-series sedan. The majority of the roughly 20,000 sedans produced at the Mexico plant this year will be exported to the United States.
A trade tax would have hurt already declining sales of the 3 series in the U.S. The car sold 44,578 units last year, a drop of 25 percent.
But company executives at last week's opening stressed that Mexico would supply global demand for the vehicle, shipping to more than 40 countries starting next year.
The surprise U.S. tariffs were a recurring question from the more than 100 journalists who attended the opening from Europe, the U.S. and Latin America. Zipse and other BMW top executives addressed the issue patiently.
"It would be very speculative to change plans on some short-term announcement," Zipse said in response to a question about whether BMW will consider avoiding the tariff by instead importing 3-series sedans to the U.S. from Germany. "Currently, we will keep our plans and we will see how far that goes."
Having a geographically diverse footprint of production factories gives automakers a hedge from trade flareups among nations, he said.
"We want to strengthen our footprint in important and growing markets," Zipse said. "This strategy has turned out to be the right answer to volatile developments in markets and politics."
Rather than appearing to be in retreat mode, BMW signaled that the new plant could have more roles, including further investment to construct an engine plant at the site.
BMW CEO Harald Krüger raised the idea of building an engine plant to serve North America late last year. The German automaker currently imports from Europe all the engines for the more than 356,000 X-series crossovers it builds at its Spartanburg, S.C., factory.
BMW's European engine plants have sufficient capacity to supply the 2.5 million cars that BMW currently produces globally, Zipse said last week. But, he noted, "If more capacity is needed in the future, the [San Luis Potosi] site has the space for an engine plant."
No decision has been made on whether to build the engine plant, or where it might be located, the automaker said.
The industry shift toward electrification could mean dwindling demand for gasoline engines.
"We are also careful to add more combustion engine capacity to our network because of the ongoing increase of purely electric drivetrains," Zipse said. "It's important to us that we don't build overcapacity."
The new Mexico plant is a 45-minute drive southeast of San Luis Potosi, a former gold and silver mining hub ringed by the Sierra Madre Oriental mountain range. The industrial city, also home to a General Motors plant, is in the heart of Mexico's auto manufacturing industry. Daimler, Nissan and FCA factories are in nearby cities.
Located in a business park, the BMW factory sprawls across nearly 750 acres and is surrounded by miles of dusty scrub land.
The current plant occupies barely more than a quarter of the site — an indication of the development's potential.
It could match the production scale of BMW's largest plant in the world, its South Carolina factory, which has a capacity of 450,000 vehicles.
"The size of the Mexico plant is big enough to reach similar capacity, if market demand is there," Zipse said.
The new plant is also designed to be flexible. Assembly lines can produce sedans, crossovers, hybrids and fully battery-electric vehicles. The plant could become the production site for the new 330e plug-in hybrid next year.
While BMW declined to say what additional vehicles it might build in Mexico, LMC Automotive suggests it could be a four-door coupe, such as a 4-series fastback.
"We assume BMW will replace the 3-series GT with this 4-series variant," said Jeff Schuster, LMC's president of global forecasting.
The Mexico factory is ramping up with production of about 100 cars a day — a fraction of the 600 cars it plans to reach with two shifts at full capacity.
The operation is a high-tech affair. Some of the more than 600 robots performed a synchronized ballet of welding and assembling doors and body panels, while others painted, and still others did the heavy lifting of mating imported powertrains to vehicle bodies.
The robots are complemented by an army of 2,500 mostly young workers. The average age of the work force is in the late 20s, compared with 40-plus at some of BMW's German plants. About a third of the work force in Mexico is female. Two-thirds of the employees recruited to the new plant have previous experience with an automaker or a supplier.
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