BMW confirms billion dollar Mexican plant

BMW is jumping the border to Mexico with $US1 billion ($AU1.07 billion) to build its second North American factory, in a bid to maintain its title as the world's top selling luxury brand.

Arch-rivals Audi and Mercedes-Benz have already announced their plans for Mexican manufacturing, and BMW says the decision to join them is in line with its policy of “globally-balanced growth”.

With plans now officially underway, the first vehicles will roll off the line at the new San Luis Potosi facility in five years but BMW is remaining tight-lipped about exactly which models the factory will handle.

Its existing North American plant at Spartanburg, South Carolina has been in operation for 20 years and currently produces about 200,000 SUVs per year, with the new factory adding 150,000 units to that figure.

The first US factory isn't missing out on BMW's global investment plans though, and will also receive its own billion dollar boost, increasing the Spartanburg capacity to 450,000 vehicles per year by 2016.

When it opens for business, the new Mexican facility will create 1500 jobs in its first year, with many more opportunities for the “highly-qualified local workforce” as the production accelerates.

The new facility will also have a knock-on effect to local businesses, promoting growth and creating jobs in the supply and manufacturing industries.

The German car giant says an established infrastructure and supply network were attractive features of the region, and the decision to invest proves its commitment to continued development in the North American Free Trade Agreement area.

Operating within the NAFTA region countries (Mexico included) streamlines the export process, but production will not be exclusively for export, with nearly 14,000 of the propeller badged vehicles finding homes within Mexico's borders last year.

Significantly lower labour costs will also have featured in BMW's business model, sitting at approximately 20 per cent of the rates of the neighbouring United States.

Another $200 million has also been earmarked to triple output at the BMW Group's carbon-fibre facility, making the Washington factory the biggest CFRP plant in the world.

The specialised composite material is used extensively in the i3 and i8 hybrid/electric vehicles and to a lesser degree in other high-performance BMW models.

BMW has yet to confirm which models will be built at the new Mexican site but the recently announced X7 large SUV is one possibility.

The sizable investment is a significant contribution to Mexico's economy and president Enrique Pena Nieto was present at the official BMW announcement in Mexico City this week.