Twenty years after revealing plans to build its first North American assembly plant, in Spartanburg, South Carolina, BMW is close to a decision to add a second one -- in Mexico.
Company sources say BMW is considering as many as four Mexican locations for a site to build the 3-series sedan, and is negotiating with local governments for incentives or tax breaks. A decision is due next year.
Production would begin in late 2016 or early 2017.
The state of Queretaro in north central Mexico is a leading contender, one source said.
Along with the 3 series, BMW is considering Mexican production for one of its new front-wheel-drive vehicles. The first BMW to use the fwd architecture will be the next-generation 1 series in 2017, when the compact range is scheduled to switch to fwd.
Capacity at the Mexican plant eventually would be 100,000 to 150,000 vehicles annually, a source said. But the plant would ramp up slowly, with annual production of no more than 40,000 or 50,000 vehicles at first -- similar to the levels BMW started with in Spartanburg. That plant began production in 1994.
BMW wants to build vehicles in Mexico because the country has trade agreements with North America, South America and some Asian countries. Trade among Mexico, Europe and the Mercosur countries of Brazil, Argentina, Uruguay and Paraguay is duty-free.
BMW looked at some potential U.S. sites, but they are not in the running, the source said.
By shifting some 3-series production to Mexico from Germany, BMW would be shielded further from currency fluctuations and could avoid expansion in the economically troubled euro zone.
Production in Mexico also would enable BMW to price the 3-series sedan more competitively against its biggest competitor, the Mercedes-Benz C class. Mercedes will produce the C-class sedan at its factory in Vance, Alabama, starting in 2014.
This year Audi chose Mexico for its first factory in North America. Audi said it will start building an SUV at the factory in 2016. A site for the plant will be selected later in the year. Audi said lower wages were key to choosing Mexico over a location in the United States.
Audi is expected to build the second-generation Q5 SUV at the factory, along with potential variants of the model, for export worldwide.
BMW is expanding the Spartanburg plant for the fifth time to increase capacity to 350,000 units annually by 2014, when it will start building the X4 crossover. Spartanburg now produces the X3, X5 and X6 crossovers.
In 2011 BMW built 276,065 vehicles in the United States, an increase of 75 percent over 2010. BMW of North America CEO Ludwig Willisch has said the U.S. plant likely will produce more than 300,000 vehicles in 2012.