Volkswagen plans to produce its Golf hatchback in Mexico as part of a push for market share in North America, where it trails global rivals.
VW will build the Golf at its factory in Puebla beginning in the first quarter of 2014, the company said today. Golfs built at the plant will be sold in North and South America, and the production will supplement output of the model at VW's home base in Wolfsburg and in Zwickau in eastern Germany, said Christoph Adomat, a spokesman.
Producing the Golf in Puebla allows Volkswagen to make "further strides towards the goal of building more than 75 percent of the cars Volkswagen of America sells in the North American region," Volkswagen's North America chief Jonathan Browning said in a statement.
The move to build the Golf in Mexico is part of a plan to spend $5 billion over the next three years in North America. Growth there is a critical to CEO Martin Winterkorn's strategy to become the world's biggest carmaker by 2018. By adding Golf production in Mexico, VW plans to benefit from lower labor costs and hedge against unfavorable currency fluctuations between the dollar and euro.
"With its existing infrastructure, competitive cost structures and free trade agreements, Mexico is the ideal location to produce the Golf for the American market," Hubert Waltl, the head of production at VW's passenger car brand, said in the statement.
"Volkswagen has ambitious growth plans and localizing production is crucial for these plans to work out," said Daniel Schwarz, an analyst with Commerzbank in Frankfurt. "You can't be successful in the mass-market segment if you only import cars."