Volkswagen, the German automaker, has announced a second phase of investment of around $1 billion in its Mexican unit, aimed at expanding its electric vehicle (EV) business in the country. The investment follows a previous plan of $763.5 million announced in late 2022 and reflects Volkswagen’s commitment to the Mexican market and the global transition to clean energy.
Volkswagen’s Puebla complex to host EV production
The bulk of the investment will be directed to Volkswagen’s Puebla complex, one of the company’s largest facilities globally, where it currently produces the Jetta, Taos, and Tiguan models. The Puebla complex will host the production of EVs for the North American market, as well as a new paint plant and a new production line. The company did not specify what kind of EVs it will produce but said it will reveal more details in the coming months.
Volkswagen’s Puebla complex is also home to Audi, the company’s luxury brand, which has been making the Audi Q5, a compact SUV, since 2016 and later added a hybrid version. Volkswagen said the investment will create more than 2,000 direct and indirect jobs in the region and will strengthen its supply chain and local development.
Global strategy for EV leadership
The investment in Mexico is part of Volkswagen’s global strategy to become a leader in the EV market, which is expected to grow rapidly in the next decade. The company has pledged to invest more than $86 billion in EVs and digital technologies by 2025 and aims to sell more than 20 million EVs by 2030.
Volkswagen has already launched several EV models, such as the ID.3, the ID.4, and the ID.6, under its new ID brand, which is dedicated to electric mobility. The company has also announced plans to build six battery factories in Europe by 2030 and to partner with other companies to secure the supply of raw materials and components for EVs.
Volkswagen’s CEO Herbert Diess said the company is “on track” to achieve its goals and that it is “determined to become the global market leader in e-mobility.”.
Volkswagen’s challenges and opportunities in Mexico
Volkswagen’s investment in Mexico comes at a time when the country is facing economic and political challenges, as well as opportunities for growth and innovation. Mexico is the seventh-largest car producer in the world and the fourth-largest exporter, mainly to the US and Canada. The country has a network of free trade agreements with more than 50 countries and a skilled and competitive workforce.
However, Mexico has also been hit hard by the COVID-19 pandemic, which has caused a sharp decline in demand and production, as well as supply chain disruptions. The country has also faced uncertainty and tension with the US, its main trading partner, over issues such as migration, security, and trade policies. The US-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA) in 2020, has imposed new rules and standards for the automotive sector, such as higher wages, regional content, and labor rights.
Volkswagen’s investment in Mexico signals its confidence in the country’s potential and resilience, as well as its willingness to adapt to changing market conditions and consumer preferences. The company said it is committed to complying with the USMCA rules and contributing to the social and environmental development of Mexico. The company also said it hopes to collaborate with the Mexican government and other stakeholders to promote the adoption of EVs and the creation of a sustainable mobility ecosystem in the country.
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