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Inside BMW’s Profit-Printing South Carolina SUV Plant

March 13, 2019 by Ryan ZumMallen, @Zoomy575M

As automakers race to glean profits from sales of their crossover and SUV models, BMW has an ace up its sleeve: the 7 million-square-foot Plant Spartanburg in upstate South Carolina.

The factory builds the automaker’s highest-demand vehicles. It receives numerous tax breaks and trade benefits that minimize cost. There also is an on-site railyard that ships directly to the nearby Port of Charleston. And BMW is planning for a busy 2019.

This year Plant Spartanburg will expand production of the redesigned X5 midsize SUV and bring its new X7 large SUV to full speed. The factory built nearly all of BMW’s light trucks – a category that includes pickups, SUVs and crossovers. That segment surpassed U.S. sales of the German automaker’s sporty sedans for the first time in 2018.

It is part of an industrywide shift in consumer preference. A decade ago, buyers were split between sedans and light trucks. Now about 70 percent of U.S. vehicle sales are pickup trucks, SUVs and crossovers.

GOING GLOBAL

BMW’s plant, however, has global plans. While U.S. sales of BMW crossovers and SUVs increased 21 percent last year, Plant Spartanburg also builds those models for international markets.

BMW Plant Spartanburg, South Carolina

Each worker at BMW’s Plant Spartanburg in South Carolina has 90 seconds to complete his or her task. (Photo: BMW)

Two-thirds of all vehicles assembled at the facility are exported. Spartanburg exports the highest volume of vehicles by total value of any plant in the country. In 2018 vehicles assembled at Spartanburg accounted for more than $8.4 billion in exports, according to the U.S. Department of Commerce.

“It’s the largest BMW plant in the world making some of the hottest products on the market,” said Laurie Harbour, president of Harbour Results, a manufacturing consulting firm.

BMW is gearing up for more. The company expects the new X7 to attract strong interest from China, Russia and the Middle East. It recently completed a $1 billion renovation at Plant Spartanburg and began another $600 million project in anticipation of increased demand. The expansions increase the plant’s total annual capacity to 450,000 vehicles.

“Plant Spartanburg has been BMW’s global center of competence for X models and continues to be so today,” said Knudt Flor, chief executive of BMW Manufacturing Co.

INSIDE SPARTANBURG

A tour reveals Plant Spartanburg to be the size of a small city. Set in the sprawling green plains of South Carolina, the plant’s campus comprises dozens of industrial buildings, each the size of several football fields.

BMW Plant Spartanburg, South Carolina

BMW’s Plant Spartanburg is the size of a small city. (Photo: BMW)

There is a welcome center with a gift shop and museum that showcases historic BMW models. There is an on-site health facility for employees. There are both indoor and outdoor test tracks on which to run new vehicles through different road conditions before they are shipped out.

The plant also is a designated foreign-trade zone, which means overseas goods can be unloaded without customs and products made there can be exported duty-free.

There are separate assembly halls for different vehicles. One houses the X5 SUV, its X6 “coupe” sibling and the large X7. Another is for the compact X3 crossover and its X4 coupe.

Inside the massive hangar-like facility, a parade of luxury crossovers crawls overhead as they move from station to station. The process begins when the plant takes delivery of about 400 individual body parts from local suppliers and welds them into an unpainted body. Once assembled, they leave the 1.2 million-square-foot body shop and head straight to the paint shop. The finished bodies are then slotted onto the assembly line, where they’re loaded with about 8,000 parts and luxury features over a 12-hour period. Each crossover has 7,000 welds. Workers have 90 seconds in which to complete their assigned tasks before the next vehicle arrives.

1,400 VEHICLES A DAY

The plant builds a combined 1,400 vehicles per day on average and still has room to grow.

BMW Plant Spartanburg, South Carolina

Luxury vehicles move overhead in BMW’s Plant Spartanburg in South Carolina. (Photo: BMW)

The X3 models that cruise along the assembly line were the automaker’s top-selling U.S. vehicle across its lineup in 2018. Sales of the X3 alone jumped to 61,000 units in the U.S. in 2018, an increase of 51 percent compared with 41,000 the year prior.

But the larger X5 is historically the volume crossover. BMW recently started building the X3 in China and South Africa to feed demand in those markets. That move freed space on the X3/X4 assembly line in Spartanburg to take on excess X5 production.

The X7 will be another cash cow in BMW’s lineup. When production of the SUV – the largest the company has ever built – comes fully online, BMW will have its first true challenger to the Audi Q7, Mercedes-Benz GLS, Range Rover and Lincoln Navigator. As part of the preparation for the X7’s arrival, the plant recently increased its total workforce to more than 11,000 on-site employees.

WHAT THE FUTURE HOLDS

Since opening in 1994 the plant has created business to foster a network of 40 top-tier suppliers in the state. The automaker trains workers for high-tech jobs, partners with nearby Clemson University and competes with Apple and Google for top talent.

To continue its success BMW must observe market trends to ensure it’s still making vehicles the market wants, Harbour said. Any change in demand for SUVs will have an outsized effect on Plant Spartanburg. Potential changes to trade deals and tariffs threaten to become a sticky subject.

“If I’m BMW I’m very concerned,” she said. “It’s the only place in the world that they make most of these products. You’ve got a huge risk if tariffs come in.”

BMW Plant Spartanburg, South Carolina

BMW’s Plant Spartanburg assembles an average of 1,400 vehicles a day. (Photo: BMW)

Harbour pointed to a Commerce Department report on automotive trade presented to President Donald Trump last month. It puts the ball in his court on whether to impose tariffs on vehicles and parts imported from Europe.

BMW sources most of its steel from the U.S., and the foreign-trade zone exempts Spartanburg from many costs, spokespeople said. The automaker can increase the capacities of its Chinese and South African plants if necessary. Tariffs would affect all automakers, including U.S. companies like Ford and General Motors. But the Spartanburg plant faces unique hurdles.

“They bring a huge percentage of parts in from somewhere else and then send them back out,” Harbour said. “It will raise the cost of the car and raise concern in the consumer on whether they’re ready to buy now.”

For now, Plant Spartanburg marches on. Workers install dashboards, tighten engine mounts and repair robots that effortlessly adhere windshields in a matter of seconds. When the horn sounds for a mandatory break the employees file past posters heralding the coming arrival of the X3 M, X4 M and X7 models to the line this year. They will bring the number of vehicles in production at Spartanburg to nine.

“We’ve got to be careful,” Harbour said. “We’ve created quite a market.”

Read next: BMW’s Virtual Vision iNext Drive Offers Peak at Autonomous Future

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