Thursday, January 19, 2017

BMW-Mexico Product versus BMW-Germany Product

Germans got all hyped up this week with Trump talk over BMW plant going up in Mexico and how the new administration might attach a 35-percent tariff on the BMWs coming across the border into the US (made in Mexico).

This made me sit and ponder this odd concept.

There is a long-standing BMW plant in Mexico, which has a production line for the 3-series, 5-series, and 7-series....along with the X-5.

The cost factor when compared to German BMWs?  No one has ever said.

How'd this ever start up?  Well....Mexico had this funny law in said (1990s it was in effect) that you had to assemble the car in Mexico, if you were going to sell it there.  So, in the beginning....they made parts elsewhere and just found the Mexican employees to assemble this.

After a while, the BMW-Mexico company (note, it's not BMW-Germany) around to making parts in the country as well....mostly because of the lack of unions and the low cost standard in Mexico.  Then they wised up and started to selling BMW-Mexico cars in the US....meaning less BMW-Germany cars were sold there.  Profit?  Sent onto Mexico....with some toward the end going to BMW-Germany as the franchise owner.

Lot of money pouring in for this new BMW Mexico plant and folks have a close eye on costs and profits.  A thirty-five percent tariff would move the cost of the vehicle in the US....up a notch.  For the rest of Latin America....the tariff has no effect.

But I sat and pondered this.  If this BMW-Mexico plant was so successful and made cars at a relatively reasonable cost....why not ship the cars back and import them into Germany?

You hear that silence?

Yeah, did I just suggest something that would freak out Germans?  Well....yeah.

If you told Germans one night that the bulk of BMWs sold in Germany were to flip and be "Made in Mexico" versus "Made in Germany"....what would happen?

Unions would get all furious.  The SPD Party would be willing to draft up massive import regulations to prevent such a thing.  The news journalists would be falling left and right over this topic.

Do Germans even realize all these BMWs made in Mexico are cutting their own production numbers?  I doubt it.

Would Germans even be willing to go and buy a Made-in-Mexico 5-series car....for 12-percent less than what a Made-in-Germany 5-series car would cost?  Could you tell the difference between the two cars?  Is there even a quality difference?

Oddly, no German journalist will dare bring this up as a topic, and ask how the German public would accept a Made-in-Mexico BMW.  Just something to think about.

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