Audi to build cars in Mexico

Volkswagen Group has settled on Mexico as the location for a factory for Audi.

The Audi supervisory board decided in favor of Mexico over a site next to VW's factory in Chattanooga, Tenn., which opened last year to build the VW Passat.

The Mexico plant will provide a boost to the VW Group’s sales prospects and manufacturing operations in North America, where its light vehicle output rose 25 percent in 2011 to a record 542,363 units.

It will also relieve supply constraints that executives say have limited Audi’s U.S. growth. The brand posted a 16 percent sales gain last year to a record 117,561.

Audi said it will build an SUV at the factory starting in 2016. A site for the plant will be selected later this year, the automaker said.

By picking Mexico, VW Group will be the first and only German automaker to locate major assembly operations south of the border to build luxury vehicles.

Mercedes-Benz and BMW--two of Audi’s chief competitors--have factories in the United States, where they build mostly crossovers and SUVs.

Other foreign premium brands, such as Honda Motor Co.’s Acura division and Nissan Motor Co.’s Infiniti unit, also build luxury models stateside.

Toyota Motor Corp.’s Lexus brand builds the RX crossover at a factory in Ontario, Canada.

The VW group already builds the VW Jetta and Beetle at its Puebla, Mexico, factory about 80 miles southeast of Mexico City. It plans to open an engine factory next year in Silao, Mexico, a centrally located city in the north, to build 300,000 engines a year for North America.

Audi’s North American factory is crucial to VW Group’s aggressive push to surpass General Motors as the world’s leading automaker. By 2018, it wants sell 10 million vehicles globally a year--up from the 8.3 million it sold worldwide last year.

In the United States, it has equally ambitious goals: it aims to sell 1 million vehicles a year here by 2018, including 200,000 Audis annually.

VW Group of America sold 443,840 vehicles in the United States last year, up 23 percent over 2010. Sales during the first three months of 2012 have climbed 34 percent to 124,293 vehicles.

By Christina Rogers- Automotive News