Why BMW actually decided to make batteries in the USA


BMW recently announced a $1.7 billion investment to help prepare its giant factory in Spartanburg, South Carolina, to produce electric cars and SUVs. That amount included $700 million to build a battery manufacturing plant in the area.

Spartanburg is BMW’s largest factory 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 are exported to another 120 countries.

It’s one of several announcements made in recent months and years as automakers prepare to start producing more electric vehicles. Mercedes, Hyundai, Honda and others have also announced battery plant construction projects in recent months. BMW’s announcement came after the passage of the Biden administration’s Inflation Suppression Act, which limits fiscal stimulus. for electric vehicles with largely US-based battery manufacturing and raw material supply.

The rules allow consumer tax credits only for electric vehicles that meet increasingly stringent U.S.-based vehicle manufacturing targets, including their batteries. They also require US sourcing of battery raw materials and place limits on vehicle costs and buyers’ incomes. Buyers can get the full tax credit only if they and their vehicles meet the requirements.

But that regulation had no effect on BMW’s decision to locate battery production in South Carolina, BMW President Oliver Zipse said in an interview with CNN Business. Simple logistics was a much more important factor.

“You’re not going to fly hundreds of kilograms of batteries around the world or put them on a ship,” he said. “You won’t. However you will localize it”.

Not only did the IRA rules not only encourage American manufacturing, but they were unnecessary, Zips said, adding that they also risk negative repercussions for the American jobs they are designed to protect.

The IRA does not provide any benefit to vehicles, regardless of how “American made” they are, unless they are sold in the US. More importantly, protectionist rules that try to undercut vehicles for American buyers could trigger retaliation, jeopardizing valuable export business, Zipse said.

“You can never make a regulation without looking at the implications of other regulators,” he said. “And I only warn that we receive a regulation.”

And simply as a practical matter, it’s difficult to wall off automakers’ supply chains the way the IRA would require, Zips said.

“To think that you can push a completely A-to-Z industry in one region of the world, in such a complex industry as the car industry, is a false assumption,” he said.

Zipse also warned of the potential consequences of regulations that prohibit the sale of zero-emission vehicles after a certain date, as in some US states and Europe. On the one hand, it can mean that overall sales in the industry will decline.

“We don’t think this drive will make up the entire market at its current size,” he said.

Not all consumers will be able to have an electric vehicle charger at home, according to Zipse, that much they could instead decide to keep their gas cars longer or buy used gas cars.

Some automakers, such as BMW rivals General Motors and Mercedes-Benz, are apparently unconcerned by the prospect of reduced sales and have announced plans to go electric at a specific date in the future. BMW has never said publicly that it plans to make only electric vehicles after a certain time.

Unlike some automakers, such as GM and Volkswagen, which make electric vehicles completely different from gasoline cars on different engineering platforms, BMW engineers its vehicles to be electric, plug-in hybrid, or gasoline-only. BMW executives offer this type of flexibility to meet market demands for different types of vehicles.

Instead, he said, regulators should gradually impose stricter emissions restrictions, leaving it up to automakers to decide how best to reach those targets., as regulators have done in the past. So far, this approach has not stopped the increase in global warming.

However, Zips insists that BMW can handle whatever they decide.

“We can easily increase them,” Zipse said of the increased regulatory demand for electric vehicles. “All our factories are qualified to build electric vehicles. We have a flexible approach.”