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BMW Gives Mini Boost to UK Automotive Sector

BMW will invest 500 million pounds ($818 million) in its UK factories as it prepares its manufacturing network for the rollout of its next-generation Mini.

2008 Mini Cooper hardtop
Source: miniusa.com
2008 Mini Cooper hardtop

The investment will centre on plants in Swindon and Birmingham, as well as at the Oxford factory where the group has been producing the current model of the Mini for the past decade. The factory has produced around 2 million vehicles in that time, BMW said. Mini is the third largest vehicle manufacturer in the UK.

BMW's announcement comes a few days after Nissan said that it would design and manufacture the second generation of the Qashqai in the UK, with production continuing at the Sunderland plant where the existing model is made.

These investments demonstrate that there is still life in automotive manufacturing in developed markets, despite an overall trend towards lower cost manufacturing locations, Tim Urquhart, automotive analyst at IHS Global Insight, told CNBC.com.

"The trend generally is to invest in production in low cost emerging markets like China and India, and in Europe towards markets in Eastern Europe, but it just shows that these plants, with the latest production techniques, with the latest production machinery and the latest training can still be competitive."

The UK is the BMW Group's fourth largest market, behind Germany, the US and China, and Urquhart noted that the company's release does not say that the production site will be exclusive, and demand could presage new sites elsewhere.

"If you read the report, it's quite clever that it says it's going to be a production location, not the production location. Mini already manufactures one of its models in Austria at the Magna Steyr contract manufacturer… that's about 20,000 units of Mini production in Austria," Urquhart said.

"That leaves open the possibility maybe of manufacturing in China, or probably more likely in the US, because we're looking at maybe just under 100,000 units by the end of the decade, and that's getting quite significant, that's getting to the kind of level where they might be thinking about manufacturing in the US as well as the UK."

BMW's stated strategy is to manufacture close to the large markets for its products.

That the two announcements come so close together, and that they have come in a sector that remains politically sensitive, provides a boost for the UK government, whose political predecessors the Thatcher government, have been accused of engineering the death of UK manufacturing.

While few believe that long-term declines in the UK's manufacturing sector can be reversed in a meaningful way, the Conservative-Liberal Democrat coalition in the UK has been vocal in its support for British industry.

In a statement accompanying BMW's announcement, Prime Minister David Cameron said, "The production and export of iconic British cars like the Mini is making a real contribution to the rebalancing of the economy that this government is determined to achieve."

Contact Europe: Economy

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