New VW Golf Mk7 for North and South America to be Produced in Mexico from Early 2014

CEO Martin Winterkorn wants VW to become the world’s number one automotive group by 2018. While the company is currently is Europe’s number one and it has increased its sales in China, Russia and Brazil, in the U.S., despite posting a 31 percent increase in 2012, it trails both General Motors and Toyota. With its European sales having plunged by 15 percent due to the debt crisis and the market set for another decline in 2013, the sixth in a row, the German group is focusing its push in the Americas. On Friday, it announced that it would start building the new Golf Mk7 at its plant in Puebla, Mexico, from the first quarter of 2014. According to company spokesman Christoph Adomat, Mexican-built Golfs will be sold in the North and South American markets and will supplement those imported from its German plants in Wolfsburg and Zwickau. Head of production at VW brand Hubert Waltl commented: “With its existing infrastructure, competitive cost structures and free trade agreements, Mexico is the ideal place to produce the Golf for the American market”. It sure is, as in addition to the lower production costs, VW benefits from getting rid of the unfavorable euro-dollar exchange rate. This move, which is part of a US$5 billion investment in the region over the next three years, will allow the company to “make further strides towards the goal of building more than 75 percent of the cars VW of America sells in the North American region”, said VW’s NA chief Jonathan Browning. The Puebla plant already assembles the Beetle, the Jetta small sedan and the Golf estate, while earlier this month, it was joined by a new engine factory in Silao that, along with the U.S. facility in Chattanooga, Tennessee, that opened in 2011, brings VW’s total North American plants to three. Commerzbank analyst Daniel Schwarz said: “Volkswagen has ambitious growth pans and localizing production is crucial for these plans to work out. You can’t be successful in the mass-market segment if you only import cars”. By Andrew Tsaousis Story References: Volkswagen via Bloomberg