Volkswagen's plant in Puebla Volkswagen's plant in Puebla.

BMW plant will begin production of 150,000 vehicles in 2019

As expected, German car maker BMW announced today its first foray into Mexico — and its second in North America — with a billion-dollar plant in San Luis Potosí. The plant will have a capacity of 150,000 vehicles a year and will begin operating in 2019.

BMW is the world’s biggest manufacturer of luxury cars, according to Bloomberg, and the last of the German car makers to establish a presence in Mexico.

Daimler AG will produce Mercedes in a partnership with Nissan starting in 2017 and Volkswagen is already well established in Mexico. In fact, its plant in Puebla is the biggest in North America.

Mexico’s free-trade agreements with the U.S., South America and Europe were critical to BMW’s decision, along with attractive labor costs, which are a fraction of those in Germany.

“Mexico’s location facilitates exports to North America as well as South America, which we think will be a future growth market,” said Frank Biller, a Stuttgart, Germany-based analyst. “If a cluster of carmakers starts production in Mexico, this will create a local industry.”

BMW production head Harald Krueger said the firm will be better positioned to take advantage of the growth potential in North and South America. “We are continuing our strategy of ‘production follows the market.’”

San Luis Potosí governor Fernando Toranzo expects the new plant will attract further businesses to his state, and that many existing ones are interested in providing services to BMW. He forecast that the factory would generate more than 10,500 indirect jobs.

It will be located in the industrial park Logistik in the municipality of Villa de Reyes.

Toranzo said it was “a hard-fought fight” with Hidalgo, the other finalist state vying for the plant’s location.

—With files from Bloomberg, El Financiero

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