The guessing is over: Audi has decided on a location for a new production site in North America—and it will be in Mexico, not in the U.S. The premium carmaker today announced it would build an SUV model in Mexico from 2016 onwards.
The decision comes as a disappointment to those Volkswagen managers who had hoped Audi would build its plant next to VW’s in Chattanooga, Tennessee. But the Volkswagen Group has a strong presence in Mexico as well: There is a production site in Puebla and an engine manufacturing plant in Silao. The location of Audi’s plant will be decided later this year.
Audi itself has never operated a manufacturing site in North America. The premium brand is lagging behind Mercedes-Benz and BMW, both of which are producing SUV models in the U.S. for both the U.S. and global markets. Audi is aware of the fact that a Mexican-built vehicle won’t carry the “Made in the USA” moniker, nor will it be regarded as highly as its German-produced vehicles—and this may be a problem for some customers.
The brand will say that an SUV will roll off the Mexican lines; so far, the brass at Inglostadt is yet to say which ones. Company sources hint at the next-generation Q5, based on an evolution of the MLB platform. Audi could also make the Q7, whose second generation will stand on a stretched MLB platform. Both vehicles will be based on what is essentially a front-wheel-drive platform and be powered by longitudinally mounted four- and six-cylinder engines; V-8 engines are possible for the Q7. The same platform will be used by a number of VW and Audi sedans, the next-gen VW Touareg and Porsche Cayenne, and the Q5′s sister model Porsche Macan.
As Audi moves production to a North American plant, it must avoid some the quality problems that have plagued not only VW’s Golf and Jetta, but also the early examples of the Mercedes-Benz M-class. But the benefits outweigh the risks. With the new plant, Audi will able to hedge currency fluctuations, production will be cheaper than in Europe, and the NAFTA customs regulation will allow Audi to make cars at far lower cost. Don’t expect the cars to get cheaper, but consider buying shares.