BMW may source transmissions in U.S.

Recently, it became known that BMW is considering the possibility to find an American-based supplier of transmissions for its US production facility in Spartanburg, S.C., the company's largest in the world.

Transmissions are extremely important and sophisticated pieces of auto design and BMW has been importing them to the US from a European supplier. However, currently the company wants to find a local supplier of transmissions for its American facility to protect itself from potential financial losses caused by possible U.S. tariffs, if the US president will translate his threat to impose duties on imported vehicles and parts into practice.

On multiple occasions, President Trump has expressed his intention to put a tax on imported cars and related spare parts, a measure that would have serious financial implications for BMW. The German carmaker manufactures its popular X-model SUVs in the US, but it imports other models to its customers here. It also imports transmissions and engines for its X-model plant in Spartanburg County from European suppliers.

Learn more about BMW’s Spartanburg Plant

Practically speaking, working with a transmission provider based in the US gives another financial benefit – the company will protect itself from currency fluctuations, a critical issue in international transactions. According to Harald Krüger, CEO of BMW, the company has already entered into the stage of substantive negotiations with one potential supplier. He did not reveal the company name, but it is well-known that BMW has strong business ties with ZF Group, a major transmission supplier which also has got production capacities in the US.

However, this type of collaboration will include a long (1 year or even more) preparation period for establishment of the manufacturing process, especially if the supplier does not have the required manufacturing capacity immediately available. Thus, some experts assume that this possible deal can be motivated by the general BMW strategy, rather than a protective measure from possible tariffs.

ZF transmission plant in Gray Court, South Carolina

But collaboration with ZF really looks like a lucrative option for BMW. ZF’s transmission plant is located close to BMW’s Spartanburg. This ZF facility annually produces approx. 800 thousand transmissions. Moreover, BMW already uses ZF transmissions on a wide range of its models. Founded in 2013, this facility was significantly expanded in 2016 (from 975,000 to 1.4 million sq. ft.) ZF has already spent over half a billion dollars for infrastructure development of this plant, which produces 8- and 9-speed automatic transmissions. Currently, this plant provides transmission solutions for non-BMW customers, such as Volvo, Land Rover and Fiat Chrysler.

Harald Krüger, CEO of BMW, at Geneva Motor Show 2019

Mr. Krüger said that BMW’s SUVs are in great demand on the American market, thus it would be great to have access to US-built transmissions. BMW founded the Spartanburg plant more than two decades ago. Initially, this facility was intended for low-volume output, thus from the very beginning plant heavily relied on imported driveline components.

But currently Spartanburg has become a driving force of BMW SUVs not only on the US market, but also in the rest of the world. Mr. Krüger also added that now Spartanburg’s annual production volume (about 400,000 units) is large enough to consider the possibility of sourcing gearboxes locally. Currently, the company is at the advanced stage of negotiations with a potential supplier, and the decision could be made by this summer.