BMW announced at an event at the plant on 28 March a USD1-billion investment into its Spartanburg, South Carolina facility, with plans for capacity to increase by 50% and the creation of 800 new jobs by 2016.
IHS Automotive perspective | |
Significance | Celebrating the start of production of the BMW X4 and 20 years of US production, the company also announced a major investment into the Spartanburg, South Carolina (US) plant, with capacity increases to 450,000 units by the end of 2016 from 300,000 units today. With an additional 800 jobs, the total workforce will reach 8,800. After the expansion, the facility will be BMW's largest. BMW says that in 2013 the Spartanburg plant made BMW the largest US vehicle exporter to non-NAFTA countries. |
Implications | BMW says the investment is needed to meet strong global demand for the X-branded vehicles – the X3, X4, X5, X6, and upcoming X7. As the sole source for the X4, X5, and X6, the X5 PHEV will be built at Spartanburg, which is confirmed for "the near future". BMW says this is the fifth expansion for Spartanburg, underscoring the commitment of the company to North American production. |
Outlook | The addition of the X7, an SUV expected to be sold globally and single-sourced from Spartanburg, is not likely to reach a high enough sales volume to account for the additional 150,000 units of capacity. IHS Automotive expects that another, unnamed model may also join Spartanburg production; possibly the 5- or 3-Series. |
BMW's chairman of the board of management, Dr. Norbert Reithofer, was on site on 28 March 2014 to celebrate 20 years of US production, the beginning of X4 production, and to announce a major expansion to the plant. BMW will invest USD1 billion through 2016 to expand production capacity from 300,000 units to 450,000 at the plant in Spartanburg, South Carolina. Currently dedicated to the X vehicles (X3, X4, X5, X6), the plant first built the 3-series, X4 and Z4 small cars, and roadsters and coupés. "Plant Spartanburg was built to enhance and expand the BMW lineup, underscoring the BMW Group commitment to the United States. In addition to X3, X5, X6, and the new X4, we are today announcing another all-new, larger X model to be manufactured exclusively at this plant for our world markets: the X7," Reithofer said in a company statement.
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The expansion will make the plant BMW's largest, as well as increase employment from 8,000 to 8,800. The newest model for the plant, the X4, goes on sale in July 2014 after its introduction at the 2014 New York Auto Show. BMW has not confirmed the timing of the X7 as yet.
BMW's investment in the facility to date is USD6.3 billion, according to remarks at the event from a member of the board of management and production, Harald Krueger. The plant began production in 1994, and BMW says more than 2.6 million vehicles have been produced there since. Most of today's production is exported – 70% according to executive remarks at the event – to more than 140 countries.
Outlook and implications
BMW's announcement included confirmation of a three-row SUV to the X range, as well as the plan that the plant will become a "centre for excellence" for this type of vehicle. IHS Automotive forecasts that global SUV sales will grow from 16.4 million units in 2014 to 20.5 million units in 2020, a compound average growth rate of 3.74%, but with total growth of 4.7 million units. BMW's global SUV sales, excluding the just-announced X7, are forecast to grow from 488,967 units in 2014 to 562,487 units in 2020, a CAGR of 2.36%. BMW's total SUV sales reach less than 3% of the global SUV market, which is an increasingly crowded and competitive space. While the brand's sales of SUVs are increasing, expected growth of about 120,000 units is less than the capacity being planned for Spartanburg, and also includes continued production of the X1 in Germany and additional production of the X3 in China.
IHS forecasts BMW's Spartanburg-produced X vehicles (excluding X7) to account for 18.7% of global BMW sales of 1.80 million units in 2014, growing to 19.8% next year before settling back to 18.7% by 2020. By 2020, BMW's global sales are forecast to rise by about 427,500 units to 2.23 million units in 2020, and increasing the capacity at Spartanburg will contribute to this. According to IHS production forecasts, BMW's global production will increase by 432,000 units by 2020. We forecast growth in Leipzig, Regensburg (Germany), the US, China, and possibly Mexico, but the Spartanburg increase may reduce pressure for more NAFTA capacity.
BMW is also planning to transfer some production of the X3 from Spartanburg to its facility in Shenyang II in China in 2018, reaching 50,000 units by 2020. It is our expectation that this shift would open up ample production to support global X7 capacity, which means BMW may have something else in mind as well for the production capacity being installed in Spartanburg. While BMW has reportedly been in talks regarding adding a plant in Mexico, it is possible these talks are not progressing (see Mexico: 19 August 2013: BMW considering Mexico production; 26 September 2013: BMW, Hyundai in talks for Mexico production – reports; and 5 February 2014: Mexican government officials say BMW is considering car factory – report).
The increased production at Spartanburg may be a signal that production in Mexico could be delayed or canceled. The addition of the X7, an SUV expected to be sold globally and single-sourced from Spartanburg, is not likely to reach a high enough sales volume to account for the additional 150,000 units of capacity. We expect that another, unnamed model may also join Spartanburg production, possibly the 5- or 3-Series.