The luxury car maker, which sells about 10% of its vehicles in the United States, said earlier this year that it is considering building a production plant in Anderson, S.C. Automotive News, a Detroit-based trade publication, reported Monday that a decision on the plant could be made within four weeks.
According to a government memo obtained by the trade journal, BMW Chairman Eberhard von Kuenheim told U.S. Consul General Andrew G. Thoms Jr. at a March 20 meeting in Munich that the auto maker is 80% sure that it will open a new production facility in the United States.
A BMW spokesman confirmed that von Kuenheim had spoken with Thoms about the company's expansion plans recently, but declined to comment on when a decision would be made. BMW is also considering sites for an assembly plant in Europe, the spokesman said.
As the value of the German mark has climbed in relation to the dollar, BMW's production costs have soared. Its pricing in the United States, pressured by a recession and stiff Japanese competition, has not. Analysts say that this, along with high German labor costs, have led BMW to look at production sites outside of Germany.
The United States, which is BMW's second-largest market after Germany, is a logical choice, though not the cheapest.
"If you just want a cheaper production area, there are cheaper places in Europe, like Spain or Portugal," said Philip Ayton, a London-based analyst who follows the European auto industry for Barclays de Zoette Wedd.
"But it makes sense to consider the U.S. because of the benefits of being closer to an important market," Ayton said.
The northeast area of South Carolina, where Anderson County is located, is already home to several BMW suppliers, including the French tire maker Michelin Corp. and Lucas Industries, which exports fuel injectors to BMW in Munich.
The decision to build a new production facility would likely go hand-in-hand with a decision to build a new entry-level small car, which BMW has been mulling for some time. The popularity of the company's new 3-series has stretched its existing plants to near capacity.
Like other German luxury car makers, BMW's share of the U.S. market has been eroded in recent years by the new Japanese luxury models such as Lexus, Acura and Infiniti. But Susan Jacobs, an auto analyst who specializes in the U.S. luxury car market, said building a U.S. plant could help BMW get its production costs and prices more in line with the Japanese.
"Right now, you're paying 5% to 10% more simply because 'BMW' is on the front," said Jacobs, whose Jacobs Automotive forecasting firm is based in Little Falls, N.J. "With the Japanese as strong as they are right now, none of the European companies can afford to pass on that premium just for the badge."
Volkswagen, the last German auto maker that tried to build cars here, took over an existing plant in New Stanton, a traditional industrial community. Beset by quality problems and labor troubles with the United Auto Workers, the auto maker closed up its American shop in 1988.