US Plant Essential For Automakers

2023 Author: Eric Donovan | [email protected]. Last modified: 2023-08-25 09:36

In the land of unlimited opportunities, German car manufacturers can hardly do anything without their own production facility. A German group in particular is now feeling this to the full.

By Stefan Grundhoff

For many years, huge price dumping has been setting the tone in the United States. Middle class, SUVs, vans or luxury sedans - almost all brands have to face the enormous price pressure. Only high-priced division models from manufacturers such as Ferrari or AMG-Mercedes get away with a black eye in the land of unlimited possibilities. But even luxury brands like Audi, BMW or Porsche cannot achieve the prices they would like to have in the tough competition between San Francisco and New York. Without your own production facility, the situation is more difficult than ever.

Seen as a local brand

Brands like Toyota, BMW or Mercedes have been able to create an important mainstay for themselves in recent years, from which they can benefit in the USA and other markets. With pickups like Tacoma, Tundra or the mid-range bestseller Camry with production facilities in Kentucky, Toyota has long been recognized as a local brand with original American values. It is no different at BMW (Spartanburg / South Carolina) and Mercedes-Benz (Tuscaloosa / Alabama). Both manufacturers shine as premium brands with a German high-tech background that produce some of their top models - especially from the popular SUV sector - in the USA.

Produce cheaper

A pleasant side effect: the productions are significantly cheaper in the USA than in Germany. In addition, the vehicles are located where they are primarily intended to be sold and difficult price fluctuations are mitigated. "The ML, GL and R-Class models from Tuscaloosa play an extremely important role in our portfolio," explains Daimler Board Member Dieter Zetsche and praises the employees. "I have never seen a spirit like this in any other work." The American team members, as they are called at Mercedes-Benz, are considered to be willing to work and extremely resilient. At the Tuscaloosa plant, three new models were pushed onto the line in just 13 months. Zetsche is already certain: “The third generation of the M-Class will also roll off the assembly line here in Tuscaloosa.»Further investments cannot be ruled out in the long term. In Munich, the considerations are no different. In addition to the BMW X3 and X5, the X6 sports crossover will also come from Spartanburg from next year. A vehicle that was developed especially for the US market.

Big problems for VW group

The examples Audi and Volkswagen show how difficult it can be without a production facility in the USA. Both have to import vehicles such as the Q7, A6, A8, Golf, Jetta and Touareg comparatively expensively and also have to struggle with an unsuitable dealer network. As strong as Volkswagen is in Europe, the business in the world's largest automobile market is not very profitable. Since 2003 the Lower Saxony have been swimming in the red; last year alone there was a loss of around 600 million euros. The new Golf and Jetta generation as well as the mid-range Tiguan SUV could turn things around for the better from 2009. In addition, it seems to be hardening that VW is producing models again in the USA after a break of around 20 years. Volkswagen boss Winterkorn and the previous duo Pichetsrieder / Bernhard make no secret of the fact that Volkswagen has to produce more specific vehicles for the US market.

If VW in the USA decides to have its own plant based on the example of Mercedes or BMW, a new van, notchback sedan or SUV could be built there. In addition, if smaller models and diesel vehicles establish themselves in the next few years, they will likely still come from Europe. It has not yet been decided exactly where such a US production facility could be located. The last Volkswagen plant was closed in 1987 in Pennsylvania. Since then, the NAFTA models have primarily come from South America. BMW and Mercedes have had good experiences in the southern United States. Mercedes has been producing its M-Class SUV models near Tuscaloosa for exactly ten years, together with their brothers in the GL and R series. BMW came a little later with the X5.

Tuscaloosa a success story

At the time, Tuscaloosa was the first Mercedes plant for cars outside of Germany. In order to cope with the immense demand, Mercedes-Benz invested a further 100 million in addition to the originally planned 300 million US dollars in order to expand the capacity to over 80,000 vehicles annually. In the meantime, the investment amounts to more than one billion US dollars and the maximum volume is around 170,000 vehicles. "This November we will have a million vehicles," says Zetsche. The new Mercedes diesels, which are sold here as well as by Volkswagen and Audi under the Bluetec label, will also come from Alabama. Automotive analysts are assuming a US diesel share of 15 to 20 percent in the medium term. Without their own production, brands such as Audi and Volkswagen will have a hard time with diesel and small car tailwinds.