Volkswagen AG will invest $550 million in developing a new engine facility in Mexico to supply parts to two of its North American plants, the German automaker said on Wednesday.
The Silao, Guanajuato plant in central Mexico is expected to build 330,000 engines annually from 2013 to meet demand from its Chattanooga, Tennessee, and Puebla, Mexico plants.
Currently, the Volkswagen Jetta, Golf Estate and the New Beetle are produced in Puebla. Production of the company's new mid-size sedan is scheduled to begin in Chattanooga in 2011, the company said.
"Mexico plays a key role" in the company's attempt to recapture North American market share, Otto Lindner, executive president of Volkswagen Mexico, said at a press conference.
Volkswagen (VOWG_p.DE) plans to sell 1 million vehicles in the U.S. annually by 2018, three times its current rate.
Volkswagen's best-performing year in the United States was 1970, when it sold 569,696 vehicles there and had nearly 6 percent share of the U.S. market, said a company spokeswoman.
Today, Volkswagen and Audi -- the company's two major U.S. brands -- comprise about 3.2 percent of U.S. light vehicle sales.
Silao is the site of a General Motors Co GM.UL pick-up truck and sport-utility assembly plant. The existing base of auto parts suppliers played a role in Volkswagen's choice of the city. the company said.
