BMW is significantly increasing its investment in German manufacturing, opting to expand production capacities at its Bavarian facilities amid broader industry trends of capacity reduction across Germany. While competitors Volkswagen and Mercedes-Benz have been scaling back domestic operations due to rising labor and energy costs, BMW is committing approximately €2 billion to upgrades and expansions involving its Munich and Dingolfing plants as well as a new battery factory located near Munich.
The Munich plant, BMW’s historic manufacturing site dating back to 1922, produces the latest all-electric version of the 3 Series, with production of the model’s eighth generation beginning in August. The facility now employs 6,000 workers and has undergone a comprehensive modernization, including three floors linked by lifts and self-driving robots that deliver parts directly to assembly lines. BMW’s head of production, Raymond Wittmann, emphasized the company’s confidence in Germany as a manufacturing base, describing the investment as a clear commitment to the region.
This move stands in contrast to broader German industrial trends, where high operational costs have led competitors to reduce capacity. The German auto industry has been shedding as many as 15,000 jobs monthly, yet BMW’s domestic production has remained comparatively resilient. In 2025, BMW produced 1.07 million vehicles in Germany, a 6 percent increase from previous levels, while overall German car manufacturing declined by 10 percent compared to pre-pandemic figures. This resilience is partly attributed to BMW bringing more production in-house, including Mini Countryman, X1, and some 5 Series models previously produced at partner plants in the Netherlands and Austria.
BMW’s strategy also benefits from the brand’s premium positioning, which encounters less direct competition from new Chinese electric vehicle entrants in Germany. Consequently, BMW maintains higher profit margins per vehicle, allowing it to better absorb German labor costs. Furthermore, the company’s earlier adoption of electric vehicles, such as the i3 launched in 2013 and the recently introduced iX3 SUV, has contributed to steady underlying demand.
Despite these advantages, BMW faces ongoing challenges. Chief Executive Milan Nedeljković warned earlier this year that the company’s operating margin would take more than five years to return to its historical range of 8 to 10 percent, with 2026 projections between just 1 and 3 percent. In addition, rising labor and energy costs continue to pressure the economics of producing in Germany. Labor costs per hour in Germany are roughly three times those in Hungary, where BMW also operates a major plant in Debrecen. While the company points to logistical advantages and streamlined production systems that narrow cost differences, some within BMW’s supervisory board have expressed concerns over the threat from Chinese competitors with newer technology and lower-cost structures.
BMW has added a night shift at its Debrecen facility to meet growing demand, particularly for electric models based on its new “Neue Klasse” software platform. Nonetheless, Wittmann acknowledged potential medium- to long-term shifts in cost competitiveness if supplier networks increasingly move eastward and production becomes more localized in eastern Europe. Maintaining the competitiveness of German plants will, according to Wittmann, depend on continued optimization of labor, energy, and broader systemic factors.
Overall, BMW’s decision to bolster German production underscores a strategic bet on the sustainability of premium manufacturing at home, aiming to leverage longstanding local expertise while navigating a complex and shifting global automotive landscape.