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Was BMW’s Decision To Build A New Euro Production Facility A Reaction To Tariffs?

Industry News / 5 Comments

In this day and age, perhaps.

Terms like "free trade" and "tariffs" have been in the news a lot lately and for good reason. As a consequence of the United States slapping tariffs on many of its long-time trading partners from Europe as well as Mexico and Canada (not to mention China), corporations across the world need to protect their own interests. BMW, for example, has just announced plans to open a new $1.2 billion production plant in Hungary, its first new facility since 2000. Bloomberg reports that this plant, once operational, will produce 150,000 vehicles a year.

But what does this new facility have to do with tariffs and trade? BMW is making sure its operations are secured in Europe, thus enabling it greater future flexibility when it comes to exports. By comparison, BMW's Spartanburg, South Carolina facility produces over 400,000 vehicles annually, so this new Hungarian plant is not a replacement (at least not yet). Spartanburg is where BMW builds its hot-selling SUVs, specifically the X4, X5, and X6.

Only the other day we reported that BMW has been forced to increases the X5 and X6's price tags in China due to newly imposed tariffs. But say if those same vehicles were, one day, built at the new Hungarian plant? Assuming the EU and China are not in the midst of a trade war, then those price increases wouldn't be necessary.

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This does not mean Spartanburg is shutting down, let alone slowing production volumes. However, it is a clear sign BMW wants to further cement its position in Europe and, by extension, other markets as well. Other major automakers, such as Audi and Mercedes-Benz, also have production facilities in Hungary. "We are now strengthening our activities in Europe to maintain a worldwide balance of production between Asia, America and our home continent," BMW CEO Harald Krueger said in the statement.

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