BMW May Build Fourth Model in U.S. to Beat Lexus, Mercedes-Benz

Bayerische Motoren Werke AG, the world’s biggest maker of luxury cars, may add a fourth model to its South Carolina factory to challenge U.S. market leaders Toyota Motor Corp.’s Lexus and Daimler AG’s Mercedes-Benz.

“There’s always room on top,” Chief Executive Officer Norbert Reithofer said in Spartanburg, South Carolina, at an event to mark the addition of the factory’s third model, the X3 sport-utility vehicle. “We have ambitious goals for the U.S.”

BMW spent $750 million to make room for the revamped X3 in Spartanburg, which comes in addition to the plant’s current X5 and X6 SUVs. An additional “volume” model for the U.S., the world’s largest market for luxury cars, could be added in South Carolina, said Frank-Peter Arndt, BMW’s production chief.

BMW is investing in the facility to reduce foreign currency exposure, which currently stands at more than 10 billion euros ($14 billion), Reithofer said. About 70 percent of the vehicles built at the site are exported from the U.S., and more than 65 percent of the value of a vehicle built in South Carolina is sourced from North America, BMW said.

It would make sense for BMW to assemble the 3-Series compact in the U.S. to compete with the Mercedes-Benz C-Class, said Rebecca Lindland, an analyst at IHS Automotive in Lexington, Massachusetts. The BMW brand sold 397,103 3-Series cars last year out of total deliveries of 1.07 million.

‘No-Brainer’

“The 3-Series is a no-brainer, if you’re looking to reduce currency exposure; that’s their volume player,” Lindland said. “That’s a business case that’s got to be studied.”

Daimler, the world’s second-largest maker of luxury cars, said last December production of its best-selling C-Class sedan would be moved to its Alabama factory, ending the model’s assembly in Sindelfingen, Germany, after more than 25 years.

BMW fell 7 cents, or 0.1 percent, to 50 euros at the 5:30 p.m. close of trading in Frankfurt. The stock has jumped 57 percent this year, valuing the carmaker at 31.9 billion euros.

The maker of BMW, Mini, and Rolls-Royce models plans to sell at least 250,000 vehicles in the U.S. in 2010, a gain of more than 10 percent, and aims to expand its share, executives at the Munich-based carmaker said yesterday. The U.S. high-end market will gradually return to pre-crisis levels over the next three to four years, the CEO said. BMW is targeting sales of 300,000 in the U.S. longer term.

The German carmaker’s U.S. sales rose 9.2 percent to 157,464 vehicles through September. Mercedes-Benz’s nine-month deliveries climbed 18 percent to 159,729 cars and SUVs. Lexus remained the U.S. leader with purchases of 162,438.

Added Capacity

The addition of the X3 in Spartanburg raises BMW’s annual U.S. capacity 50 percent to 240,000. South Carolina has supported the factory by training workers at local technical colleges and offering tax breaks for new hires. The state also charges BMW just $1 a year to lease the plant’s land, which is owned by South Carolina’s ports authority.

The new X3, which goes on sale in the U.S. on Jan. 22, will be bigger, adding more than 3 inches in length and 1 inch in width, and be sold at a lower price, to take on Volkswagen AG’s Audi Q5. BMW will also begin selling the X1 crossover in the U.S. in 2011, said U.S. chief Jim O’Donnell.

The overhauled X3, offering optional in-car Internet access, will have a starting price of $37,625, O’Donnell said. That’s about $1,225 lower than the current asking price and closer to the $35,200 Audi charges for the Q5, introduced in March of 2009.

Nine-month U.S. deliveries of the Q5 jumped 78 percent to 16,636 vehicles, making it Audi’s second-best seller in the country after the A4 sedan. The X3’s nine-month U.S. sales fell 1.2 percent to 5,036 as consumers wait for the new version.

“We have given up the market with the old X3 for these last two years,” O’Donnell said in an interview with Bloomberg Television. “Next year we’ll be back on top.”

To contact the reporter on this story: Chris Reiter in Spartanburg, South Carolina via 6226 or creiter2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net.

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