After the Inflation Reduction Act was signed into law by President Joseph Biden, the number of electric vehicles and plug-in hybrids that qualify for the $7,500 tax credit dwindled significantly. This is because the act requires final assembly in North America, meaning the United States, Mexico, or Canada. Among the German automakers, BMW lucked out the most with two vehicles on the list: the BMW X5 Hybrid, which is built in South Carolina, and the BMW 3 Series Hybrid, which is built in Mexico.
Though BMW would love to build fully electric vehicles in the US, the South Carolina plant is currently running at full capacity. This is why, according to a recent interview with Forbes Mexico, the German automaker's San Luis Potosi factory in Mexico may be asked to do some of the heavy lifting.
In addition to the 330e PHEV, San Luis Potosi currently produces the BMW 2 Series and will soon build the next-generation M2 for the global market. The plant has reportedly asked to add full EVs to its portfolio, a move that's likely linked to the recent Inflation Reduction Act.
"We are already producing plug-in hybrid cars and have requested to produce all-electric vehicles in the future," Harald Gottsche, president and CEO of BMW Group Planta San Luis Potosi, told Forbes. "It is very important for Mexico to improve the external factors for the automotive industry in order to attract these high investments to the country, thus ensuring long-term growth and jobs."
BMW currently builds its EVs in Germany and China, but Mexico will be crucial to the company's success here in the US market. The German automaker will base its manufacturing decisions on demand, "which often depends on incentives and a sufficient charging network, the availability of renewable energy, and the availability of suppliers of relevant components such as battery cells," said Gottsche.
In the case of incentives in the USA, they are now locked to North American production in the US, meaning BMW USA needs to produce cars locally to receive them. Whether or not EV demand in the US is high enough to justify the investment it would take to alter the tools and training required at the plant remains to be seen.
BMW is far from the only automaker that was caught off guard by the recent legislation. The Hyundai Motor Group was completely left out from qualifying for tax credits because all of its EVs and PHEVs are built outside of North America. Hyundai already announced billions of dollars in investments to build EVs in the US, but those factories won't go online overnight. The Korean automaker plans to speed up construction to get its credits back as soon as possible, while Honda has also made moves to bolster American production facilities.
BMW doesn't need an entirely new factory, but moving EV production to Mexico will require a substantial investment. That said, if the plant is asking to be considered, it clearly feels it would meet the criteria that BMW would put forward or is close to doing so.