Audi to invest Eur 1 billion in its new plant in Mexico image

Volkswagen AG’s Audi premium brand will invest around EUR1 billion in its new plant in Mexico, CEO Rupert Stadler said, German trade publication AUTOStrassenverkehr reports.

The company said the factory would start production in 2016 and produce an SUV model, though it did not say which one.

Volkswagen already has a plant in the Mexican city of Puebla and a new one in Chattanooga, Tenn., and it has been mulling an Audi plant for North America for several years.

The Wolfsburg, Germany-based automaker sold 117,561 Audis in the U.S. in 2015, up 16 percent over the previous year. It’s targeting annual U.S. sales of 200,000 Audi vehicles by 2018, when Volkswagen expects to be the world’s largest automaker.

Low labor costs averaging about $8 an hour – compared to more than $50 in the U.S. – certainly work to Mexico’s advantages, industry officials suggest. But there are other pluses, including the country’s central location, which makes it easy to ship finished vehicles to both North and South America.

VW originally wanted to expand its U.S.-based factory in Chattanooga, Tennessee, which was only opened a year ago, to make room for production of Audi vehicles.