Audi’s new plant in Mexico marks expansion to luxury model production

Article by Christian Andrei, on April 23, 2012

With the decision of the Volkswagen Group to build a new factory for Audi's Q5 sports utility vehicle in Mexico, the country's automobile industry would become competitive in a wider array of vehicle production including luxury models, according to Armando Soto, who is the president of auto industry consulting firm Kaso y Asociados based in Mexico City.

VW's decision to choose Mexico for the Audi factory was announced on April 18. The country's auto industry had been focusing on pickup trucks and small cars. Soto commented that Audi's presence in the country will reposition the worldwide perceptions of Mexico as a manufacturing platform. He further stated that this suggests the nation can build luxury vehicles "very competitively" and not just production of pickups and small cars. 

In the past year, Honda, Nissan and Mazda have also publicized their plans to construct new plants in Mexico, where the industry is benefitting from the country's proximity to the United States, lower wages and free-trade deals with at least 30 nations. In March, Ford Motor Co. declared that it would invest $1.3 billion in its plant in northern Mexico in order to manufacture the new Lincoln MKZ and Fusion models. The Audi factory will be its first in North America. Initially, it will have an annual capacity of 150,000 Q5s, according to Audi CEO Rupert Stadler. Operations at this plant will commence in 2016. 

According to Audi’s statement, Mexico provides "excellent economic basis" for the automaker's production operations considering that it is an established nation for vehicle manufacturing. Audi will be together with German rivals Mercedes-Benz and BMW in building SUVs in North America for delivery around the world. 

Audi will select a location in Mexico later this year for the factory. The VW core brand of Volkswagen already has an automobile and engine plant in Mexico. The country produced 2.68 million automobiles in 2011, up 14% from the year before, according to Bloomberg's compiled data. During the first quarter of 2012, automobile export production increased 15% to 604,212 units, the data from the Mexican Automobile Industry Association revealed.

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