Take the i3 for example, its bold design and popularity during its 11 years of production, selling a quarter of a million units. Now, BMW is hoping to become a leader in electrification with the Neue Klasse generation. However, the company will not produce these new electric cars in the US. They will be produced in Mexico. With the risks of a trade war looming, this could be a smart move.
Despite a strong start, BMW failed to capitalize on its lead as the second wave of electric vehicles such as the Tesla Model 3 and Y went global in 2019/20. The company has returned to form since then with an extensive range of electrical, helped it overtake Tesla in European sales in July.
However, most of these current electric vehicles are built on platforms shared with internal combustion models, as BMW has hedged its bets while the electric market accelerates. still unpredictable. The upcoming Neue Klasse is different. It is designed first for Battery Electric Vehicles (BEV).
Neue Klasse Déjà Vu again?
The new Neue Klasse is reminiscent of BMW’s corporate savings strategy of the 1960s, also by the same name. At the time, BMW was producing some great cars, such as the little Isetta and the beautiful 502 convertible, but they weren’t selling in enough numbers, leading to financial difficulties. So with the 1962 Neue Klasse, BMW ditched all the old models and switched to a common platform across the entire range, creating much-loved models like the 1800 and 2002. This laid the foundation for today’s globally familiar models, such as the 3-series.
BMW is not facing the same financial problems as the early 1960s, though Its profits fell 84% due to a decline in sales in China. But electrification is a major challenge for the entire auto industry, leaving many traditional manufacturers behind. Globally, Tesla and BYD dominate BEV sales, each selling more than a million cars in the first three quarters of 2024. Geely and Volkswagen are third and fourth, respectively, with half a million sales each. All four focus primarily on original BEV designs. While hedging the bet has advantages during the transition, it misses out on the advantages that a platform designed specifically for batteries could offer, such as greater internal space.
The new Neue Klasse signals that BMW has realized that the transition has passed the point of no return and it’s time to go all in on BEVs. The company is clearly expecting this new generation of cars to be as game-changing as the turning point of the 1960s. Although the new Neue Klasse model is a sedan, an SUV (which BMW calls an SAV, stands for sports activity vehicle) will make its debut in 2025. The first factory to produce Neue Klasse cars was in Debrecen, Hungarywith Munich going fully electric by 2027. This makes sense when serving the European market – but what about the important US market?
Mexico is flexible
Enter Mexico. You would think that BMW would make electric vehicles in the US for the American market, and for most of its mainstream internal combustion models, it does so through its giant factory in Spartanburg, South Carolina, where Export 1,500 cars per day. However, BMW has demonstrated Mexico’s potential as a global auto manufacturing hub, with its successful 2-series and the hot M2 model produced exclusively in Mexico for the entire global market. bridge. In the US, the 2-series has won a series of coveted quality awards from JD Power, showing the quality the Mexican operation can achieve.
Currently, BMW’s factory in San Luis Potosí, Mexico, is the company’s newest facility, and construction is well underway to add an 80,000-square-foot battery pack manufacturing unit to serve electric vehicles. Neue Klasse will begin production in 2027.
According to Oliver Haase, Senior Vice President Purchasing, Quality and Supplier Network, BMW Group Americas, Mexico is “a natural fit to produce the next generation of BMW electric vehicles for the market.” America”. He also saw its potential beyond the North and South American continents. “BMW will be the first premium automaker to produce electric vehicles and batteries in Mexico.”
This goes beyond the cost of cheap labor. “Mexico has 14 free trade agreements with 50 countries,” said Francisco N. González Díaz, Executive Chairman, Industria Nacional de Autopartes, AC. The most important of these is the USMCA with the US and Canada (formerly NAFTA), but Mexico also has agreements with the European Free Trade Association, which includes the EU, Iceland, Norway, Lichtenstein and Switzerland. There are agreements with most of South and Central America, plus the UK and the CPTPP, which includes Australia, Japan, New Zealand and Singapore. “This makes it an extremely good place to produce cars for the global market.”
Mexico is “a natural fit to produce the next generation of BMW electric vehicles for the Americas market.”
Oliver Haase, Senior Vice President, Purchasing, Quality and Supplier Network, BMW Group Americas
To put that into perspective, Mexico exports more cars to Germany than to China or the UK – nearly $4.8 billion by 2023 (this figure includes brands other than BMW). The country has a thriving auto parts supply chain and is always ready to recruit STEM graduates to work in the auto industry. BMW puts a lot of effort into providing training and apprenticeship opportunities with local universities and has even turned its original green office building in San Luis Potosí into a youth activity center for the local area called Club de Niños y Niñas.
Neue Klasse has been advertised as an all-electric generation. However, Haase admits this does not mean the end of internal combustion engines at BMW. “The Neue Klasse will lead the design direction, but there will be room for cars with other types of powertrains in the new generation,” he said. In a similar vein, Stellantis’ recent BEV-focused platforms, such as the one used in the Peugeot e-3008, also support hybrid internal combustion engines.
Mexico’s Trump card?
The re-election of Donald Trump could be a key element in BMW’s Mexico strategy. During his campaign, on the Joe Rogan podcast, he declared his undying love for tariffs and threatened a 60% tax on imports. Electric vehicles manufactured in China already face a 100% tariff when imported into the US. Even with China’s manufacturing costs being significantly lower, that has caused Chinese automakers to seek domestic production or put any thought of entering the U.S. market on hold.
Mexico’s auto industry exported more than $64 billion in the first half of 2024. That’s a significant contribution to the country’s income, with a GDP of $1.789 trillion in 2023. Mexico imported just over 41 billion USD of automobile products, bringing a positive trade balance of nearly 23 USD. billion USD, of which the US is the largest contributor and is growing. That’s the kind of deficit the President-elect wants to reverse in favor of the United States. Trump has yet to mention canceling the USMCA. There is one A joint review is planned for 2026but this only begins the 10-year period until USMCA expires, and Trump is more focused on restricting Chinese companies than German companies from manufacturing in Mexico. However, he could also try to limit imports from elsewhere, including Mexico.
BMW already has a huge US manufacturing plant in Spartanburg, North Carolina, so it could theoretically convert some production lines there – although it wouldn’t be easy considering the amount of work. (and money) spent preparing the factory in Mexico for production. Tram. “Nothing will happen at this stage,” a BMW spokesperson told Fortune. It’s too early for us and we don’t want to speculate.” That seems to be the mood of the moment, with other companies making similar statements. No one knows exactly what President-elect Trump plans to do (possibly including himself). However, while he could renegotiate the USMCA, it would not directly affect Mexico’s other trade agreements.
He could unleash a tit-for-tat international trade war, with non-US trade agreements caught in the crossfire. But even Trump will find it difficult to dismantle the complex web of global agreements during his four years as US president. Despite recent political events, BMW’s plan to produce the Neue Klasse in Mexico still seems smart. It not only allows the supply of BMW’s new electric generation to the key market of the US and the Americas. It could deliver this important new reach to many other countries with minimal trade barriers.
