German automakers plan to invest more than $25 billion by 2017 to avoid currency convulsions and expand in other markets.
BMW, which is one of the largest US car exporters, announced it will begin production of its new X4 SUV at its plant in South Carolina, besides the other three SUV models it manufactures there. Daimler said it will expand the Mercedes plant in Alabama and Audi invests $1.3 billion to build a plant in Mexico. This year VW has opened its 100th plant, a $550 million engine plant located in Silao, Mexico.
VW currently has 77% of its production capacity outside its home market, surpassing GM’s 76% and Toyota’s 59%. The German automakers will still make this investment even if the 18% slide of the euro against the dollar since 2008 has made production in Germany more profitable for these automakers. But the companies also take into consideration the other side of the exchange rate squeeze as Daimler said that this year profit will be reduced by 200 million euro due to the currency swings.
“We aim to move closer to the customer,” said Joachim Schmidt, head of Mercedes-Benz sales and marketing. “We’re expanding our production capacity in China and the U.S. and we’re considering other countries for vehicle assembly, such as Russia or Brazil.”
In 2012 BMW, which is the largest luxury auto maker, manufactured 29% of its vehicles outside Europe, an increase from 16% ten years ago. Mercedes manufactured more than 90% of its cars in Europe a decade ago and last year it made about 70% in its home region.