BMW expected to expand manufacturing in Mexico

A recent article published by The Wall Street Journal further investigated potential plans luxury automaker BMW has to begin manufacturing in Mexico. The German-based company would join an extensive list of other brands that have established a presence in Mexico. According to The Journal, BMW is working out the details of a project that would result in a $1.5 billion manufacturing facility in the country. With the goal of beginning operations by 2016, the move would further highlight the growing automotive sector in Mexico and the strength of manufacturing in the region in general.

Forces of attraction
The Journal highlighted the fact that labor costs in Mexico are significantly lower than in competing offshore markets, such as China. In fact, manufacturers in Mexico spend roughly 11 percent less on labor-related expenses than businesses operating in China, according to research conducted by consulting enterprise Alix Partners. At the same time, Mexico has already invested significant resources in strengthening their automotive sector. Around 4 percent of the country's gross domestic product is drawn from the vehicle industry, comprising 20 percent of all manufacturing in the nation.

Free trade agreements have helped solidify Mexico's position as a manufacturing destination. In addition to the North American Free Trade Agreement, the country has cooperated with members of the European Union, Japan and over 40 other countries to boost trade.

Meanwhile, Mexico's proximity to Canadian, South American and U.S. customers is also a reason that many companies have set up manufacturing hubs in the country.

Plans for market expansion
Mexican government officials indicated the new factory would be the source of production for Series 1 and Series 3 BMW models primarily - although other styles would likely be manufactured there as well. A priority for the car maker is reaching target consumer markets.

"With the European markets still in recession, there's an increasing need for manufacturers there to explore a broader range of markets," explained Mike Jackson, analyst at the research firm IHS. "BMW has a good reason to look to Mexico because the market is maturing and is a good platform to export to the U.S. and also Asia."

While the new facility would be a new addition to the auto manufacturer's operations worldwide, BMW has been part of the car market in Mexico for some time. In 2013, BMW sold 20 percent more vehicles in Mexico than the previous year, the Mexican Association of Car Dealerships indicated.

By expanding in Mexico, BMW has set itself up to reach consumers in North and South American end-markets with greater dexterity and convenience.