Take the i3, audacious in design and fashionable over the 11 years of its manufacture, promoting 1 / 4 of 1,000,000 items. Now, BMW is hoping to turn out to be a pacesetter in electrification once more with its Neue Klasse era. Nevertheless, it received’t be making these new EVs within the U.S. They are going to be manufactured in Mexico. With the dangers of commerce wars on the horizon, this might be a sensible transfer.
Regardless of the pinnacle begin, BMW did not make the most of its early lead when the second wave of EVs just like the Tesla Mannequin 3 and Y went international in 2019/20. The corporate has returned to kind since then with an intensive electrical vary, which enabled it to surpass Tesla in gross sales in Europe in July.
Nevertheless, most of those present EVs are constructed on platforms shared with inside combustion engine fashions, as BMW hedged its bets whereas electrical market development remained unpredictable. The upcoming Neue Klasse is totally different. It’s designed for Battery Electrical Automobiles (BEVs) first.
Neue Klasse Déjà Vu All Over Once more?
The brand new Neue Klasse harks again to BMW’s company-saving technique of the Sixties, additionally of the identical title. Again then, BMW was producing some sensible automobiles, such because the tiny Isetta and delightful 502 convertible, however was failing to promote them in sufficient quantity leading to monetary issue. So with the 1962 Neue Klasse, BMW dropped all of the outdated fashions and moved to a shared platform throughout the vary, leading to much-loved autos such because the 1800 and 2002. This laid the muse for the fashions that at the moment are globally acquainted, such because the 3-series.
BMW isn’t dealing with the identical monetary points because the early Sixties, though it has seen its earnings plunge by 84 p.c attributable to a droop in gross sales in China. However electrification is a large problem to the whole automotive business, with many incumbent producers being left behind. Globally, Tesla and BYD dominate BEV gross sales, shifting over 1,000,000 automobiles every within the first three quarters of 2024. Geely and Volkswagen are a distant third and fourth respectively promoting half 1,000,000 apiece. All 4 focus totally on BEV-native designs. Whereas wager hedging has benefits through the transition, it misses out on the benefits a platform designed particularly for batteries can provide, akin to larger inside house.
The brand new Neue Klasse indicators that BMW has realized that the transition is previous the purpose of no return and it’s time to go “all in” with BEVs. The corporate is clearly anticipating this new era of automobiles to be simply as game-changing as its Sixties pivot. Though the poster little one of the brand new Neue Klasse has been the sedan, an SUV (which BMW calls SAV, standing for sports activities exercise automobile) goes to be the preliminary launch in 2025. The primary manufacturing facility to construct Neue Klasse automobiles has been the plant in Debrecen, Hungary, with Munich turning into completely all-electric in 2027. This is smart to serve the European market–however what concerning the vital US market?
Versatile Mexico
Enter Mexico. You’ll assume BMW can be constructing its EVs within the U.S. for the U.S. market, and for many of its mainstream inside combustion fashions, it has, by its big plant in Spartanburg, South Carolina, which produces 1,500 automobiles a day. Nevertheless, BMW has confirmed the potential for Mexico as a worldwide heart for automotive manufacturing, with the profitable 2-series and its scorching M2 spinoff made completely in Mexico for the whole international market. In America, the 2-series has received a sequence of coveted high quality awards from J.D. Energy, exhibiting the standard that the Mexican operation is able to.
Presently, BMW’s manufacturing facility in San Luis Potosí, Mexico, is the corporate’s latest facility, and the development work is nicely underway so as to add an 80,000m2 battery pack manufacturing unit to serve the Neue Klasse EVs, which is able to start manufacturing in 2027.
In accordance with Oliver Haase, Senior Vice President for Buying, High quality and Provider Community, BMW Group Americas, Mexico is a “pure match for manufacturing the following era of BMW EVs for the Americas market.” He additionally sees its potential past the North and South American continents. “BMW would be the first premium automaker to supply EVs and batteries in Mexico.”
That is about way more than low-cost labor prices. “Mexico has 14 free commerce agreements with 50 international locations,” says Francisco N. González Díaz, Government President, Industria Nacional de Autopartes, A.C.. Most essential amongst these is the USMCA with the USA and Canada (previously NAFTA), however Mexico additionally has an settlement with the European Free Commerce Affiliation, together with the EU, Iceland, Norway, Lichtenstein and Switzerland. There are agreements with most of South and Central America, plus the U.Ok. and the CPTPP, which incorporates Australia, Japan, New Zealand and Singapore. “This makes it an extremely good place to construct automobiles for a worldwide market.”
Mexico is a “pure match for manufacturing the following era of BMW EVs for the Americas market.”
Oliver Haase, Senior Vice President for Buying, High quality and Provider Community, BMW Group Americas
Placing that in perspective, Mexico exports a larger worth of automobiles to Germany than China or the U.Ok. – practically $4.8 billion in 2023 (this consists of different manufacturers than simply BMW). The nation has a thriving automotive half provide chain and prepared availability of STEM graduates for employment within the auto business. BMW places a number of effort into offering coaching and apprenticeship alternatives with native universities and has even turned its authentic greenfield workplace constructing at San Luis Potosí right into a youth exercise heart for the native space known as the Membership de Niños y Niñas.
The Neue Klasse has been pitched as an all-electric era. Nevertheless, Haase admits this doesn’t imply the tip of inside combustion at BMW. “The Neue Klasse will lead the design course,” he says, “however there will probably be room for autos with different kinds of powertrains inside the new era.” Similarly, Stellantis’s current BEV-focused platforms, akin to that used within the Peugeot e-3008, additionally help hybrid inside combustion motors.
Mexico’s Trump Card?
Donald Trump’s reelection might be a spanner within the works for BMW’s Mexico technique. Throughout his marketing campaign, on the Joe Rogan podcast he proclaimed his timeless love for tariffs and threatened a 60% tax on imports. EVs made in China already face 100% tax when imported into the USA. Even with China’s significantly decrease manufacturing prices, that has left Chinese language automakers on the lookout for native manufacturing or placing all ideas of coming into the American market on maintain.
Mexico’s auto business exported over $64 billion within the first half of 2024. That’s a big contribution in direction of the nation’s earnings, with a GDP of $1.789 trillion in 2023. Mexico imported simply over $41 billion in auto merchandise, giving a optimistic commerce stability of practically $23 billion, with the U.S. being the largest contributor and rising. That’s the sort of deficit the President-Elect wish to reverse again within the U.S.’s favor. Trump has not talked about canceling the USMCA but. There was a joint evaluate already scheduled for 2026, however this solely begins a ten-year clock for the expiration of the USMCA, and Trump is extra targeted on proscribing Chinese language firms than German ones working manufacturing in Mexico. Nonetheless, he might additionally attempt to limit imports from elsewhere, together with Mexico.
BMW already has its big U.S. manufacturing plant in Spartanburg, North Carolina, so in concept, it might swap some manufacturing there – though it received’t be straightforward contemplating how a lot work (and cash) has gone into getting ready the manufacturing facility in Mexico to make EVs. A spokesperson for BMW advised Fortune: “Nothing will probably be forthcoming at this stage. It’s too early for us and we don’t want to speculate.” That appears to be the temper of the second, with different firms making comparable statements. No one is aware of precisely what President-Elect Trump plans to do (most likely together with himself). Nevertheless, whereas he might renegotiate the USMCA, that received’t immediately have an effect on Mexico’s different commerce offers.
He might set off a tit-for-tat worldwide commerce struggle, with non-U.S. commerce agreements caught within the crossfire. However even Trump is unlikely to have the ability to demolish the sophisticated lattice of worldwide offers in his 4 years as US president. Regardless of current political occasions, BMW’s plan to make the Neue Klasse in Mexico nonetheless appears sensible. Not solely does it allow supply of BMW’s new electrical era to the important thing U.S. and Americas market. It could ship this very important new vary to many different international locations with minimal commerce obstacles.
