BMW's new Mexico plant will build up to 150,000 cars a year, report says

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MUNICH (Reuters) -- A new BMW car plant in Mexico will be capable of building 150,000 vehicles per year, a source told Reuters today.

BMW said on Monday it would make an announcement in Mexico on Thursday, although the company stopped short of confirming it will be about a widely expected decision to build a factory in the market.

Speaking on condition of anonymity, a Mexican government official said on Monday that the plant would likely amount to an investment of at least 1 billion euros ($1.36 billion) and would be located either in Hidalgo state north of Mexico City or San Luis Potosi in central Mexico.

BMW is considering Mexican production for its new front-wheel-drive vehicles Automotive News reported last year. The new Mini, which is currently being rolled out globally, is based on the fwd platform and the next 1 series, due in 2017, will use the architecture.

In May, German business paper Handelsblatt said BMW may build 3-series and 1-series cars and possibly Mini models at a new Mexican plant.

Production of the 3-series in Mexico would enable BMW to price the sedan more competitively against its biggest competitor, the Mercedes-Benz C class, which Mercedes began building for the U.S. market in Vance, Alabama, last month.

Building the 1 series compact model and Mini in the plant will allow the automaker to offset lower margins for smaller vehicles, Handelsblatt reported.

On Friday, Daimler and the Renault-Nissan Alliance said they would invest 1 billion euros ($1.36 billion) to develop small cars and build a factory in Aguascalientes, Mexico

Audi is building a factory in San Jose Chiapa, Mexico, with annual production capacity of about 150,000 vehicles to make the Q5 SUV starting in 2016.

Building cars in Mexico allows European automakers to sell cars in the United States while avoiding some of the currency and tariff costs that crimp profits on imported vehicles. Mexico also offers lower labor rates than Germany and the United States.

Automotive News Europe contributed to this report

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