Why did BMW decide to manufacture batteries in the United States?


BMW recently announced that it would invest $1.7 billion to prepare its huge plant in Spartanburg, South Carolina, to produce electric cars and SUVs. This amount includes $700 million to build a nearby battery manufacturing plant.

Spartanburg is the largest BMW plant in the world. It employs 11,000 people and produces 40,000 SUVs a year, only 40% of which are sold in North America. The rest is exported to 120 countries.

It’s one of many announcements in recent months and years that automakers are gearing up to build more electric vehicles. Mercedes, Hyundai, Honda and others have also announced plans to build battery factories in recent months. BMW’s announcement follows the Biden administration’s passage of the Inflation Relief Act, which offers limited tax relief. Primarily for US-based EVs that have battery production and raw material inventory.

The rules only allow consumption tax credits for electric vehicles, as well as their batteries, which meet increasingly stringent targets for vehicles made in the United States. They also require U.S. supplies of battery raw materials and impose caps on vehicle costs and buyer revenue. Buyers can only get the full tax credit if they and their vehicle are eligible.

But such regulations had no effect on BMW’s decision to build batteries in South Carolina, BMW Chairman Oliver Zipsey told CNN Business in an interview. Ease of logistics was the most important factor.

“You’re not going to fly or ship a hundred kilograms of batteries around the world,” he said. “You won’t. You still locate.

Not only were the IRA regulations unnecessary to encourage American manufacturing, but they also risked harming the American jobs they were meant to protect, Zipsey said.

The IRA does not provide any benefits for vehicles, whether or not they are “American-made”, unless they are sold in the United States. More importantly, protectionist rules that attempt to block U.S.-made vehicles from U.S. buyers could lead to retaliation and threaten valuable export businesses, Zipsey said.

The BMW iX M60 all-electric sports vehicle is manufactured at the BMW plant in Leipzig, Germany.  BMW's plant in South Carolina is also gearing up to build electric cars.

“You can never regulate other regulators without seeing the consequences,” he said. “And I’m just warning that we’re getting a tit-for-tat deal.”

Zipse simply said that in practice it is difficult to shut down an automaker’s supply chain as required by the IRA.

“The idea that in one region of the world, in an industry as complex as the automotive industry, you can foster a complete industry from A to Z is a false assumption,” he said.

Jeeps also warned of unintended consequences of regulations prohibiting the sale of zero-emission vehicles after a certain date in some US states and Europe. First, it could mean that overall industry sales will decline.

“We don’t think this one drive unit will do the whole market in its current form.”

Not all customers will be able to keep an electric car charger at home, Jeep said Instead, they may decide to keep their gas-powered cars longer or buy exhaust-powered cars.

Some automakers, such as BMW rivals General Motors and Mercedes-Benz, aren’t concerned about the prospect of lower sales and have announced plans to go all-electric by some future date. BMW never said announced its intention to produce only electric vehicles after a certain period.

Unlike some automakers like GM and Volkswagen, which separate electric vehicles from gasoline vehicles on different engineering platforms, BMW builds its cars as electric, plug-in hybrid, or pure gasoline. BMW executives emphasize such flexibility to meet market demands for a variety of vehicles.

Instead, he said, regulators should gradually impose stricter emissions limits and let automakers figure out how to meet those targets., As regulators have done in the past. So far, this approach has not stopped global warming.

Zipse insisted that BMW could drive the car regardless of the regulators’ decision.

“We can easily scale them,” Zipse said of the increasing regulatory requirements for electric vehicles. “All of our factories are suitable for the production of electric vehicles. We have a flexible approach.

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