German car maker Audi plans to build a new factory somewhere in North America to assemble the new Q5 SUV.
According to Automobilwoche, VW Ag., favors Mexico for the North American assembly plant over a site on the grounds of its U.S. manufacturing complex in Chattanooga.
An Audi spokesman in the United States said: “It’s on the table for the board to review, and from that point, it can take a lot of different directions.”
Starting car production in North America is a cornerstone of Audi’s plan to overtake German rival BMW AG as the world’s best-selling luxury-car maker.
Volkswagen originally wanted to expand its factory in Chattanooga, Tenn., to make room for the creation of Audi vehicles. And, VW currently has plants in Puebla, Mexico and will open another plant in Silao, Mexico in 2013.
The decision on whether to open the production plant in Mexico or the U.S. has benefits for both sides.
For example, by building in Mexico, the German automaker can avoid the 10 percent duty levied on cars that are built in the United States and shipped to Europe.
Audi sold 346,100 (312,500; +10.8 percent) vehicles worldwide in the first quarter.
Automakers like to group plants near to each other to be close to a fixed supplier base, but also often look to locate in neighboring states to diversify the number of politicians in Washington sympathetic to their causes.
This was the strategy for Hyundai when they annouced the West Point Kia factory just over the Georgia state line from their Alabama manufacturing facility.