BMW pledges to build EVs at South Carolina plant as Biden pushes $4,500 tax credit for U.S.-made vehicles

The issue of where EVs are produced has taken on increased importance in recent weeks, now that the Biden administration is campaigning for a provision in its budget bill that will grant an extra $4,500 federal tax credit to union-built EVs manufactured in the U.S.

Chief executive Oliver Zipse said the beginning of EV production in the U.S. is linked to the specific sequence of future models to be rolled out, implying it may not come until those nameplates built in Spartanburg like the X7 full-size SUV are due to get a battery-powered version. 

“It depends on the actual launch of the vehicles, so yes, over time there will also be electric cars, but it’s too early to tell the exact date,” the BMW boss told analysts on Wednesday. 

The announcement comes as electric vehicles have received heightened attention after Hertz announced it would add 100,000 Tesla Model 3 sedans to its lineup, sending shares in Elon Musk’s company soaring.

None of the next three BMW brand models set to be equipped with a fully electric drivetrain—the X1 crossover as well as the 5 Series and 7 Series sedans—are now assembled in the United States. 

Spartanburg is BMW’s largest single manufacturing plant, building 361,365 units of the X3, X4, X5, X6, and X7 model lines in 2020. With $8.9 billion worth of vehicles shipped abroad, it is also the biggest U.S. car exporter by dollar value anywhere in the country. 

While it may not produce any electric vehicles, it does already have a high-voltage battery assembly. That is because roughly 13% of the plant’s output last year were low-emission X3 and X5 plug-in hybrids that feature small electric-only EPA ranges of up to 30 miles depending on the model.

Burned by experience

BMW sold 44,541 fully electric vehicles across its BMW and Mini brands last year, and aims to grow sales of its zero-emission cars by an average of more than 50% annually by 2025.

The company is, however, the least ambitious EV producer among the trio of German carmakers that include Volkswagen Group and Daimler. BMW burned itself with its early gamble to enter the niche U.S. market for battery-powered cars in 2014 with the slow-selling i3 subcompact. 

It is only now preparing to flank the urban hatchback with the iX SUV and i4 four-door fastback imported from Germany, starting in March. Whether the U.S. market will get the iX1 crossover expected to roll off the assembly line in Bavaria’s Regensburg plant next year is unclear at present.

As part of its shift to EVs, BMW is focusing on reducing well-to-wheel emissions (which include those produced in the assembly of the car and its constituent parts) rather than simply tank-to-wheel emissions, given the large CO2 footprint from manufacturing battery cells. BMW, for example, aims to gradually raise the share of recyclable material used in its cars to 50%.

Earlier Wednesday, BMW reported quarterly results that showed the company was on track to deliver an operating return of 9.5% to 10.5% at its core car business this year. Due to the strong pricing power for new and used cars resulting from the chip shortage, it remained “fully confident” for 2022.