BMW to invest $1 billion in Mexico plant (copy)

BMW Chairman Harald Kruger, shown here during an announcement of a new plant in Mexico, said the automaker is considering a second U.S. plant to build engines and transmissions for its South Carolina campus. File

German automaker BMW, which has its largest manufacturing site in South Carolina, is considering a second U.S. plant to help offset the impact of tariffs and currency rate fluctuations, the company's chairman said this week.

Harald Kruger said at the Los Angeles Auto Show that an additional U.S. factory would focus on building engines and transmissions for vehicles made at the manufacturer's sprawling Upstate site, which builds more than 350,000 SUVs each year.

Historically, about 70 percent of the vehicles assembled in Greer are exported to foreign countries through the Port of Charleston.

"We have talked for the past few years about an engine plant to support our North American production and sales," Kruger said Tuesday. "And now, with increasing production levels in North America, we are again investigating this option."

Kruger did not say where the proposed engine plant might be located.

Kruger's comments come as President Donald Trump is expected to announce additional tariffs — 25 percent on vehicles and parts imported from overseas — as early as next week. BMW currently imports the engines and transmissions installed in its South Carolina-built vehicles.

The suggestion of a second U.S. plant is the latest BMW proposal to offset tariffs that will cost the automaker about $350 million this year. BMW, which already builds X3 SUVs in China for that market, said this month it might add production of a second vehicle at its China site. The company also has raised the prices of some cars exported from the U.S. to China, which has imposed retaliatory tariffs on U.S.-made vehicles.

BMW is investing $600 million in an expansion of its Upstate campus — which employs about 10,000 workers and supports hundreds of suppliers — and last month debuted the X7, the carmaker's largest SUV. Kruger said he expects the site to have record production numbers in 2019.

However, exports of South Carolina-made BMWs have tumbled 21.2 percent since the Chinese tariffs took effect in July. China is the biggest foreign market for BMWs.

Trump's latest proposed tariffs on foreign cars and parts would hurt consumers, according to the Center for Automotive Research. The group said the import taxes would add nearly $2,300 to the price of a U.S.-made car while reducing sales by 2 million vehicles per year.

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BMW isn't the only South Carolina automaker to feel negative impacts from tariffs. The import taxes have been a "big burden" for Volvo Cars, CEO Hakan Samuelsson told CNBC during this week's Los Angeles car show.

Volvo builds S60 sedans at its $1.1 billion manufacturing campus near Ridgeville. The automaker, based in Sweden and owned by China's Geely Holding Group, has already said it won't export cars to China while the tariffs are in effect and might not hire as many people in South Carolina as it originally planned.

Another round of tariffs targeting foreign-made cars imported to the U.S. "would really hit the Volvo business and the whole automotive business," Samuelsson said.

"I think the losers will be the consumers because long term, cars will be more expensive," Samuelsson said. "And, of course, employment. This is a global business so there is employment worldwide for cars being sold in the U.S."