Take the i3, stable in design and popular over the 11 years it’s been in production, and selling a quarter of a million. Now, BMW is hoping to become a leader in electrification once again with its new generation Neue Klasse. However, they will not make these new EVs in the US They will be made in Mexico. With the threat of trade wars looming, this could be a smart move.
Despite the head start, BMW failed to capitalize on their early lead when the second wave of EVs like the Tesla Model 3 and Y went global in 2019/20. The company has returned to form since then with many electronic models, which it managed to overtake Tesla in sales in Europe in July.
However, many of today’s EVs are built on platforms shared by internal combustion engine models, with BMW hedging its bets as the size of the electric market remains unknown. The upcoming Neue Klasse is different. They were originally designed for Battery Electric Vehicles (BEVs).
New Class Déjà Vu All Over Again?
The new Neue Klasse harkens back to BMW’s 1960s company lifeline, which also bears the same name. Back then, BMW was making cool cars, like the small and beautiful Isetta 502 convertible, but it was unable to sell them in sufficient numbers which led to financial problems. So with the Neue Klasse of 1962, BMW dropped all the old models and moved to a shared platform, which resulted in the most loved cars like the 1800 and 2002. This laid the foundation for the models that are now well known around the world, such as the 3-series.
BMW is not facing the same financial problems as in the 1960s, though has seen its profits drop by 84 percent due to declining sales in China. But electrification is a big problem for the entire car industry, with many responsible manufacturers left behind. Globally, Tesla and BYD dominate BEV sales, moving more than one million vehicles in the first three quarters of 2024. Geely and Volkswagen are third and fourth with half a million sales. All four focus mainly on the design of the BEV model. While the bet has its advantages in terms of flexibility, it misses out on the advantages that a platform designed for batteries can offer, such as more interior space.
The new Neue Klasse shows that BMW has realized that the transition is past the point of no return and it’s time to go “all in” with BEVs. The company clearly hopes that this new generation of cars will be as revolutionary as the 1960s pivot. Although the image of the child of the new Neue Klasse has been a sedan, the SUV (which BMW calls SAV, standing for sports car) will be released for the first time in 2025. The first factory to build Neue Klasse cars has been a plant in Debrecen, HungaryMunich to be all electric in 2027. This makes sense to serve the European market-but what about the more difficult US market?
Flexible Mexico
Enter Mexico. You might think that BMW is manufacturing its EVs in the US for the US market, and for most of its internal combustion models, it said, through its main factory in Spartanburg, South Carolina, which produces 1,500 vehicles a day. However, BMW has proven Mexico’s potential as a world car manufacturing center, with the successful 2-series and its hot hatch M2 made in Mexico only for the international market. In America, the 2 series has won several coveted awards from JD Power, showing the quality of Mexican work.
Currently, BMW’s factory in San Luis Potosí, Mexico, is the company’s new location, and construction is underway to add an 80,000m2 battery to power the Neue Klasse EVs, which will begin production in 2027.
According to Oliver Haase, Vice President of Purchasing, Quality and Supplier Network, BMW Group Americas, Mexico is “ideal for the production of the next generation BMW EV for the American market.” He also sees its potential to extend to the North and South American continents. “BMW will be the first to manufacture EVs and batteries in Mexico.”
This is more than just labor costs. “Mexico has 14 free trade agreements with 50 countries,” said Francisco N. González Díaz, Regional President, Industria Nacional de Autopartes, AC. The most important among these is the USMCA with the USA and Canada (formerly NAFTA), but Mexico also has an agreement with the European Free Trade Association, including the EU, Iceland, Norway, Lichtenstein and Switzerland. There are agreements with most of South and Central America, including the UK and the CPTPP, which includes Australia, Japan, New Zealand and Singapore. “This makes it the best place to manufacture cars in the world market.”
Mexico is “suitable to produce the next generation of BMW EVs for the American market.”
Oliver Haase, Vice President of Purchasing, Quality and Supplier Network, BMW Group Americas
Based on this, Mexico exports more expensive cars to Germany than China or the UK – about $4.8 billion in 2023 (this includes other models than BMW). The country has a thriving automotive sector and the availability of STEM graduates to work in the automotive industry. BMW is committed to providing teaching and learning opportunities with local universities and has transformed its original green office building in San Luis Potosí into a community youth activity center called the Club de Niños y Niñas.
The Neue Klasse is set as an all-electric generation. However, Haase admits that this does not mean the end of internal combustion at BMW. “The Neue Klasse will lead the way in production,” he says, “but there will be room for cars with other types of electricity within the new generation.” Likewise, Stellantis’ latest BEV-focused platforms, such as those used in the Peugeot e-3008, also support hybrid internal combustion engines.
Mexico’s Trump Card?
The re-election of Donald Trump could be a big step for BMW’s operations in Mexico. During his campaign, on the Joe Rogan podcast he announced his undying love for tariffs and threatened a 60% tax on imports. EVs made in China already face a 100% tariff when imported into the USA. Despite China’s extremely low prices, this has left Chinese automakers scrambling for local production or halting all plans to enter the American market.
The automotive industry in Mexico exported $64 billion in the first half of 2024. This is a significant contribution to the country’s economy, with a GDP of $1.789 trillion in 2023. Mexico exported more than $41 billion in automotive products, providing an investment of approximately $23. billions, with the US being the largest contributor and growing. That’s a problem the President-Elect would like to reverse in favor of the US. Trump has not mentioned withdrawing the USMCA yet. There was a A joint review is already planned for 2026but this only starts the ten-year clock on the USMCA’s demise, and Trump is more focused on banning Chinese companies than German ones operating in Mexico. However, they may also try to block imports from elsewhere, including Mexico.
BMW already has its main production facility in the US in Spartanburg, North Carolina, so, theoretically, it can change some things there – although it will not be easy considering the amount of work (and money) that has gone into preparing the factory in Mexico for production. EVs. A BMW spokesperson told Fortune: “Nothing is going to happen at this point. It’s nonsense for us and we don’t want to think too much. This seems to be the way it is now, with other companies talking the same way. Nobody knows what President-Elect Trump is going to do (maybe including himself). .However, even if they were able to renegotiate the USMCA, this would not affect other Mexican trade.
They could trigger a global trade war, with non-US agreements falling into conflict. But even Mr. Trump can’t bring down the global crisis in four years as US President. Despite recent political developments, BMW’s plan to produce the Neue Klasse in Mexico still seems sensible. Not only does it help bring the new generation of BMW electric cars to the mainstream US and American markets. It could bring this new important list to many other countries with less trade restrictions.
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