There are lots of reasons Audi chose to build its Q5 crossover in Mexico: cheap labor, a government willing to bend over backward to seal the deal and favorable trade agreements with several nations.
But at the May 4 groundbreaking for the plant in San Jose Chiapa, CEO Rupert Stadler offered another explanation for deciding not to locate in the United States: Europeans' growing fondness for SUVs and crossovers.
That favors Mexico over the United States because the European Union slaps a 10 percent tariff on U.S.-built vehicles. That would cost Audi more than $3,000 per Q5. Europe does not apply a tariff on Mexico-built vehicles.
When Audi's plant in San Jose Chiapa starts producing the Q5 in 2016, just 25 percent of its capacity of 150,000 cars per year will be allocated to the United States, Stadler said. The other big market will be the European Union.
Mercedes-Benz currently ships GL-class, M-class and R-class models built in Tuscaloosa, Ala., to Europe and BMW's Spartanburg, S.C., plant is the sole global source for the X3, X5 and X6.
"When our key competitors made the decisions for Spartanburg and Tuscaloosa, it was the mid-'90s," Stadler said. "There had not been any free trade agreements from Mexico toward the world. And the prediction at that time was that the SUV was only a U.S. issue, and nothing for Europe. This has dramatically changed."