Audi’s new SUV plant will be located in San Jose Chiapa in Mexico. Earlier this year, Volkswagen's luxury car unit unveiled a plan to open a plant in Mexico. Audi hoped to benefit from the low labor costs in Mexico and from being exempted from import duties in several regions. The savings are expected to help Audi attain its goal of hitting sales of 1 million cars in the U.S. by 2018. Audi said that the new plant will have an annual production capacity of around 150,000 vehicles, as expected. The Q5 sport utility vehicles would be produced there, beginning in 2016. The factory is situated around 40 miles from Volkswagen's current manufacturing operations in Puebla, which build the Beetle and Jetta.
Audi didn’t refer particularly to the current supply chain of VW as the deciding factor. It cited other factors: “site conditions, logistics links, infrastructure, well-qualified employees and living quality.” In a statement, Audi CEO Rupert Stadler, said this production site meets the different major requirements of its global growth strategy and it will enable the company to advance its activities in the U.S.
Audi also said that San Jose Chiapa is an “ideal” base from which to supply global markets. With this shift, VW will be nearer to its rival Nissan in volume in Mexico. This will help Audi to get closer to the levels achieved by BMW and Mercedes in the U.S. These two German-based rivals have recorded production milestones in the U.S. (the No. 2 market in the world) since the 1990s. Each of their sales are about double than Audi’s sales.