March 28 (Bloomberg) -- Bayerische Motoren Werke AG, the world’s biggest maker of luxury vehicles, will spend $1 billion expanding its sport-utility vehicle factory in South Carolina, making the U.S. site the German manufacturer’s biggest plant.
BMW will raise production capacity 50 percent by 2016 at the factory in Spartanburg to 450,000 vehicles, Chief Executive Officer Norbert Reithofer said today in a statement. The plant will add a large SUV called the X7 to its lineup, and BMW will sell the model globally.
The growth of Spartanburg marks “a new milestone in the history of the BMW group,” Reithofer said in the text of a speech to be delivered today at the plant. “This underscores the BMW group’s strong commitment to the U.S.”
BMW, Audi and Mercedes-Benz are all planning at least a fourth consecutive record in annual deliveries in 2014 on growth in China and U.S., the world’s two largest auto markets. They’re adding production as the demand outstrips production. Daimler AG’s Mercedes announced plans earlier today to spend 1 billion euros ($1.4 billion) to double capacity at its Beijing plant to more than 200,000 autos a year in 2015.
“It makes sense for German premium carmakers to add production capacity in markets like North America and China,” Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG, said by phone. “The utilization of BMW’s Spartanburg factory is already very high” and demand for SUVs continues to grow faster than the overall auto market.
The Spartanburg plant is Munich-based BMW’s only North American factory, part of the German company’s network of 28 production sites in 13 countries. It makes all of BMW’s X3, X5 and X6 SUVs, and is one of the U.S.’s main auto exporters. Reithofer is at the South Carolina site to mark the start of production of the new, coupe-like X4 SUV.
BMW’s largest factory has been its plant in Dingolfing near Munich, where it produces the 3-, 5-, 6- and 7-Series models, along with the M5 and M6 high-performance sedans. The automaker built 342,000 cars in Dingolfing last year.
Stuttgart, Germany-based Mercedes, which ranks third in luxury-car sales to BMW and Volkswagen AG’s Audi, makes SUVs at a factory in Tuscaloosa, Alabama, where it’s introducing production of the C-Class sedan in June. Mercedes has added work shifts at the plant, as well as at sites in Germany and Hungary, to keep up with higher sales of its SUVs and compacts.
Daimler Chief Executive Officer Dieter Zetsche said this month that the company may set up a new plant in North America to add capacity as he rolls out 30 new models by the end of the decade, a dozen of which will have to predecessor.
Audi, which doesn’t yet produce vehicles in North America, is constructing a $1.3 billion factory in San Jose Chiapa, Mexico, that’s scheduled to begin building the Q5 SUV in 2016. VW said today it will also add capacity in China, with a site yet to be selected.
Production in the U.S. helps protect European manufacturers from the effects of the dollar-euro exchange rate. Currency shifts may weigh on car-division revenue this year, BMW said in mid-March.