Volkswagen AG says it plans to rework its assembly plant in Puebla, Mexico, to supply the United States with the next generation of Golf and GTI hatchbacks.
That is expected to loosen up inventories in North and South America when the cars go on sale in 2014. It also suggests VW may replicate the strategy that helped the Passat sedan post huge sales gains after production moved from Emden, Germany, to Chattanooga in 2011.
The Golf and GTI currently are made in Germany. Manufacturing them in Mexico will lower labor costs and shorten supply lines to the crucial U.S. market.
Volkswagen has not talked about U.S. pricing for the seventh-generation Golf, which went on sale in Europe in November. But with stated plans of boosting U.S. sales to 800,000 by 2018, dealers say VW may cut the base price from the current $18,890, including freight.
"We see this as an opportunity to expand the role that Golf plays for the U.S., and you can be sure that we're looking to be competitive," Jonathan Browning, CEO of Volkswagen of America, said last week.
VW cut the price of the Passat by about $7,000 when the redesigned American-built version debuted in September 2011. Sales of the sedan increased 413 percent to 117,023 in 2012.
While sales of the previous version of the Passat were held back in the United States by its price tag, the German-made Golf -- the worldwide best-seller for Volkswagen -- sells fairly briskly, says Wade Walker, a Volkswagen dealer in Vermont.
If inventories of the Golf and GTI grow because of production in Puebla, dealers could sell more -- but a price cut would help, he says.
"What VW is looking for is an entry-level car. When we talk about an entry-level car, we're talking something under $17,000," says Walker, president of Walker Motors Inc. in Montpelier, Vt. "If we can get it down to that level -- if it went down $1,000, $1,500 -- that would be great."
The factory in Puebla, which supplies the Jetta and Beetle to the United States, currently has a capacity of about 600,000 vehicles per year.
Browning said Volkswagen will not increase its work force in Puebla to accommodate Golf and GTI production.
He also said the move will not "explicitly" increase production, suggesting VW does not have immediate plans to add assembly lines.
"That doesn't mean it couldn't be increased going into the future," Browning added.
VW says it wants the Puebla plant to meet all Golf and GTI demand for North and South America, eliminating the need to import the cars from Europe.
VW sold 52,800 of the cars in North America and South America in 2012, with 40,885 of those sold in the United States.