Volkswagen AG is planning to rework its Puebla assembly plant in Mexico to produce the next generation of Golf and GTI hatchbacks that will be marketed in the United States. VW’s move is expected to loosen up its inventories in North and South America when the models become available in 2014.
The move also suggests that VW would employ the same strategy that helped Passat sedan log strong sales gains after its production was shifted from Emden, Germany, to Chattanooga, Tennessee in 2011.
VW currently builds the Golf and GTI in Germany. By shifting their production to Mexico, VW could cut labor costs and at the same time shorten supply lines to the US market. Although VW has yet to disclose the pricing of the latest generation of the Golf in the US, dealers expect the carmaker to slash the starting price from the current $18,890 (including freight) – considering the company’s plans to increase sales in the US to 800,000 units by 2018.
Jonathan Browning, chief executive of Volkswagen of America, said that they see the move as an opportunity to expand the role that Golf plays for the US, adding that it means the carmaker is looking to be competitive. VW slashed the Passat’s price by around $7,000 when it rolled out the redesigned American-built version in September 2011. The carmaker also posted a 413-percent increase in sales to 117,023 in 2012.
According to Wade Walker, a Volkswagen dealer in Vermont, the current version of the German-built Golf – the carmaker’s global top-seller – had been selling briskly in the US, unlike the German-built Passat. He said that if the Mexican production of the Golf and GTI would boost inventories, dealers could sell more, noting that a price cut would definitely help.