The BMW Group’s strategy: Production follows the market
The BMW Group aims at achieving balanced growth in all markets and on all continents. To this end, the BMW Group’s highly efficient, flexible and agile production network applies the principle of ‘production follows the market’. Thanks to its international alignment, the BMW Group Production operates full plants in key markets such as the NAFTA area, China or Europe, which produce vehicles for both the local market and the export.
The company continuously monitors and analyzes market developments and customer demands. If trends are changing significantly, the BMW Group can react flexibly by taking the respective product and site decisions. At present, the BMW Group sees the emerging markets in Asia and the Americas as major growth drivers. Consequently, a new production site is being built in San Luis Potosí, Mexico (start of production: 2019); most recently, the BMW Group set up a plant in Araquari, Brazil (start of production: fall 2014) and opened another Chinese plant in Tiexi (2012). In addition, the company is expanding its U.S. plant in Spartanburg.
Globalization and production in Germany are not antipodes.
However, it is important to note that the BMW Group does not shift capacities away from Germany or Europe, but caters to additional demand outside of Europe. Globalization and production in Germany are not antipodes. The best solution for the BMW Group is the intelligent combination and cooperation within a global production network, which currently comprises 30 sites in 14 countries. The great flexibility of these international production structures is a competitive advantage the BMW Group applies depending on the respective market developments and customer demands. This is why, for instance, the company has decided to build the BMW X4 in Spartanburg and the BMW 2 Series Active Tourer in Leipzig. In China, the BMW Group plans the production portfolio in close cooperation with its Chinese joint venture partner, Brilliance China Automotive Holdings Limited.
The BMW Group maintains its commitment to Germany as a production location: 2013 marked the third consecutive year in which the company produced more than one million vehicles in Germany. For the company, the country offers clear benefits, such as the excellent vocational training level, which is also ‘exported’ to the BMW Group’s foreign locations. Other positive factors include the extensive experience and outstanding expertise of the workforce as well as the presence of numerous technology suppliers.
Access to new markets with long-term growth potential.
Besides making vehicles, the local production units are responsible for tapping into and/or expanding new markets: Local production sites facilitate the access to new markets with long-term growth potential.
This is the strategy the BMW Group primarily pursues in such markets whose high customs duties impede the import of finished vehicles, and thus also further market penetration. Local assembly plants allow the BMW Group to offer products at competitive prices in these markets as well, making the company a ‘local player’. Currently, seven assembly plants put together cars and motorcycles from imported parts kits and add locally produced components. The BMW Group’s foreign assembly sites include Rayong
(Thailand), Chennai (India), Kaliningrad (Russia), Cairo (Egypt), Jakarta (Indonesia), and Kulim (Malaysia). In addition, there is a motorcycle assembly plant in Manaus (Brazil).
Production sites and a correspondingly high purchasing volume in significant sales regions with different currencies furthermore help to balance out the streams of goods as well as currency fluctuations and risks (natural hedging).
South Africa as the first step towards becoming a global player.
For the BMW Group, globalization has been an important element of the corporate strategy for more than four decades now. As early as in 1973, the first foreign plant was set up in Rosslyn/South Africa. By 1997, the assembly site in Rosslyn was extended step by step into a full plant, comprising the core technologies, i.e. body shop, paint shop and assembly.
Today, the BMW Group’s Rosslyn plant is an illustrative example of how a local production site can drive a successful market entry: First off, the sales figures went up considerably, thanks to the local production and therefore the bypassing of high import duties. Since the omission of customs restrictions and the full expansion of the plant, the BMW Group has been producing 3 Series Sedan models both for the local market and for global export. As an established ‘local player’, the BMW Group’s local production supports sales in South Africa where now more than 27,000 vehicles of all model series are sold per year.
Production in the NAFTA area.
An important milestone in the BMW Group’s commitment to the NAFTA area was the decision, taken in 1992, to establish a production site in the U.S. The plant in Spartanburg, South Carolina, was opened in 1994. On the occasion of the site’s 20th production anniversary in 2014, the BMW Group announced the expansion of the U.S. plant. In a clear commitment to North America as a production location, the company is going to invest a total of one billion U.S. dollars by the end of 2016, making the site in Spartanburg the largest BMW Group plant worldwide in terms of annual capacity: Spartanburg’s production capacity is going to increase from currently 300,000 vehicles a year to 450,000 in the future, an increase of 50 percent and up threefold from the capacity at the beginning of 2010.
According to a study published by the U.S. Department of Commerce, the annual export volume of the BMW Group’s Spartanburg site stands at 7.5 billion dollars, making the BMW Group’s U.S. plant also the number one car exporter in the United States in relation to the total export volume, excluding NAFTA markets. About 70 percent of the vehicles made in Spartanburg are shipped abroad.
Furthermore, the BMW Group is investing another 200 million dollars in the joint venture carbon fiber plant in Moses Lake, Washington, earmarked for an expansion of the site and for tripling the local production capacity in the long term. This investment will make Moses Lake the world’s largest carbon fiber plant. By 2019, the BMW Group will have invested a total of 2.2 billion dollars in the NAFTA region. At the same time, the BMW Group set up a new plant in Araquari in the Brazilian state of Santa Catarina, which went
on stream in September 2014. Thanks to its sites in the U.S., Mexico and Brazil, the BMW Group will in future have significant production capacities at its disposal in key locations in both North and South America.
Tapping Asian growth markets with major potential.
The first step into the Asian market was taken in the 1980s. Today, the BMW
Group operates two assembly plants with external partners in Jakarta
(Indonesia) and Kulim (Malaysia) as well as two own assembly plants in Rayong (Thailand) and Chennai (India). In addition, BMW cars have been built at a plant in Shenyang in Northeastern China since 2004; the site is operated by a joint venture with Brilliance China Automotive Holdings Limited and solely caters to the Chinese market. The location in Shenyang comprises not only the Dadong plant in Northeastern Shenyang but also a new site in Tiexi, which started production in 2012.
Made in England: MINI production in the UK.
The MINI brand has been closely linked to the UK for several decades now. And the production of MINI in Oxford is not only a commitment to the brand’s identity but at the same time a consistent implementation of the company’s successful strategy of ‘production follows the market’. The BMW Group is currently investing another 750 million British pounds in the British production triangle: The investment, to be completed in 2015, is part of the international growth strategy for the MINI brand and secures the long-term future of the Oxford plant and safeguards jobs at the Swindon press shop and at the Hams Hall engine plant near Birmingham.
As the MINI brand is showing substantial growth, the BMW Group needs additional, external production capacity on top of the capacity of the MINI plant in Oxford which stands at about 260,000 units per year in the medium term. So as another important step in the implementation of the global growth strategy, the BMW Group is currently expanding its overall production capacity. Splitting production of the new MINI Hatch between Oxford and the contract manufacturer VDL Nedcar gives the BMW Group’s global production network greater flexibility for other models. At the same time, the UK production triangle is and will remain the heart of MINI production.