Volkswagen is considering production of Audis as well as VW-brand models at its new factory in Chattanooga, Tennessee.

Two Audi models are under discussion for possible U.S. assembly, Automotive News Europe's sister publication Automobilwoche has learned from company sources: the A4 sedan and the midsized Q5 SUV, which will be introduced in Europe this September.

Audi planners say a volume of 50,000 to 80,000 vehicles is necessary to justify U.S. production.

"The example of BMW shows that a local factory helps a company capture the market," said Juergen Pieper, an analyst with Bankhaus Metzler.

VW plans to launch production of a midrange sedan at the plant early in 2011. The plant, which has been budgeted to cost 620 million euros or about $973.5 million, will have capacity to build up to 200,000 units a year.

The new site encompasses 1,359 acres, large enough to set up an assembly building for Audi and, in the longer term, for VW's major shareholder Porsche as well.

In studying the case for a U.S. plant, Volkswagen had considered building the VW Touareg, Audi Q7 and Porsche Cayenne SUVs there. They are all on the same platform.

But Porsche has rejected U.S. production.

"There is absolutely no consideration being given to the production of vehicles in the U.S.," a Porsche source said. "There is no supplier base with appropriate capabilities for Porsche."

Most major German suppliers, including Bosch, Continental and ZF Friedrichshafen, have plants in the region to serve U.S., Japanese and German customers. Mercedes-Benz has an assembly plant in neighboring Alabama while BMW has its U.S. plant 250 miles from Chattanooga in South Carolina.

You may e-mail Pia Krix at pkrix@craincom.de