Audi News SUV Plant in Mexico Aimed at Unseating BMW image

Tomorrow, May 4th, Audi executives will meet to break ground on the $1.3 billion plant in Mexico, capable of manufacturing 150,000 units annually.

The plant located in San Jose Chiapa is a key piece in Audi’s plan to surpass BMW and Mercedes in the US luxury auto sales, by boosting production of SUVs. Audi will manufacture here the Q5 SUV beginning with 2016 for the US and other markets and by 2020 the automaker will add three new SUVs.

“The new Mexican plant plays a very important role for Audi, because Audi can produce in North America independent of U.S. dollar currency swings,” VW Chief Executive Officer Martin Winterkorn said on the sidelines of an industry conference in Vienna last week.

Profit from Audi will also help parent VW in its plan to surpass GM and Toyota and become the largest automaker in the world by 2018. Deliveries during the first quarter reached 2.27 million at VW, still behind GM’s 2.36 million and Toyota’s 2.43 million units. From VW’s operating profit during Q1, Audi accounted for 56%. This year Audi is expected to account for 42% of VW’s profit, or 5 billion euro, as spending on expansion and the aging model lineup cut into margins.

“Audi’s winning in other markets such as China, and there is no reason why they should not be able to repeat this in North America,” said Christian Stadler, a management professor at the University of Warwick in Coventry, England.

Source: Bloomberg