The Mexican government is in "advanced" talks with BMW about a new car plant in the country, according to a Wall Street Journal report. The newspaper says that the expected investment is about USD1.5 billion, and the plant would build the 1 Series and 3 Series, among others, by 2016. The final location has not yet been resolved, with indications that BMW could make an announcement by the end of the first quarter of 2014. Nevertheless, a BMW spokesperson said, "We explore different countries as potential locations for future production sites. However, there has been no decision to set up a production location in Mexico." If it goes ahead, the plant could be used to supply increased local demand in the region and to help the US economy.
Significance: According to IHS Automotive production forecasts, production in the NAFTA region is growing as it becomes an increasingly attractive export production site. As IHS analyst Mike Jackson said, "With the European markets still in recession, there's an increasing need for manufacturers there to explore a broader range of markets. BMW has a good reason to look to Mexico, because the market is maturing and is a good platform to export to the US and also to Asia." A significant component of the production increase in North America comes from exports. BMW built about 300,000 cars and SUVs in the United States in 2013; we forecast this to increase to about 368,000 units by 2017. We also currently forecast that BMW's production in Mexico would not start until 2018 or later. Despite the recent flurry of activity, Mexico has been building cars since 1921 and is not a new player to the business.
