Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury cars, is considering building engines in North America for the first time and expanding vehicle production in the region to capitalize on growing demand, three people familiar with the matter said.
BMW may establish a motor factory in Mexico or the US, and the Munich-based company could potentially decide on the project next year, according to the people, who asked not to be identified because the talks are confidential.
The carmaker would join German premium-auto rival Mercedes-Benz in producing engines in the region as Asian and US rivals already do. Mercedes will start using motors next year built at a Nissan Motor Co plant in Tennessee.
BMW has largely restricted its engine-making to Europe, only announcing a plan last year to build 4-cylinder units in Shenyang, China, to supply the company’s local car plants in Dadong and Tiexi.
“Engine technology is BMW’s core competence,” Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler, said by phone. “Establishing local motor manufacturing abroad is more complex than assembling cars, but it’s a logical step for them to eventually start making engines in markets where they’re expanding vehicle production,” to reduce the cost of logistics and mitigate currency effects.
The German company set up its only North American factory in Spartanburg, South Carolina, in 1994. The site, which produces all of BMW’s X3, X5 and X6 sport-utility vehicles, is one of the US’s main auto exporters.
BMW may expand vehicle-making in the region beyond a new model already announced for next year, the people said.
“As part of our long-term growth strategy, we’re frequently looking at different countries for possible locations of future production facilities,” BMW spokesman Mathias Schmidt said by phone.
Daimler AG’s Mercedes-Benz division, which ranks third in global luxury-car sales after BMW and Volkswagen AG’s Audi unit, makes SUVs in Tuscaloosa, Alabama.