Bloomberg News

Audi to Make Q5 SUV in Mexico in Global Challenge to BMW

April 19, 2012

Audi AG will build the Q5 sport-utility vehicle in Mexico for the global market in a bid to challenge Bayerische Motoren Werke AG as industry leader. Photographer: Guenter Schiffmann/Bloomberg

Audi AG will build the Q5 sport-utility vehicle in Mexico for the global market in a bid to challenge Bayerische Motoren Werke AG as industry leader. Photographer: Guenter Schiffmann/Bloomberg

Audi AG, the world’s second-biggest luxury-car manufacturer, will build the Q5 sport-utility vehicle in Mexico for the global market in a bid to challenge Bayerische Motoren Werke AG (BMW) as industry leader.

The Mexican factory, which will begin operating in 2016, will initially have capacity for 150,000 Q5s a year and will cost considerably less than 2 billion euros ($2.6 billion) to build, Audi Chief Executive Officer Rupert Stadler said at a briefing today in Hamburg.

Audi, owned by Volkswagen AG (VOW), will join German competitors BMW and Daimler AG (DAI)’s Mercedes-Benz unit in making SUVs in North America for delivery worldwide. Audi sells about half as many cars in the U.S. as BMW and Mercedes-Benz, and has a target of increasing sales in the country by 59 percent from last year to 200,000 vehicles by 2018. VW’s namesake brand already has a car plant and engine factory in Mexico.

The Q5 is “a product that would sell very well in the U.S.,” Arndt Ellinghorst, a London-based analyst at Credit Suisse analyst with an outperform recommendation on VW, said by telephone. “Volkswagen has all the components for that platform already in Mexico in their Puebla plant, so I would be surprised if it’s not somewhere around the Puebla region.”

Audi will choose a location for the Mexican plant later this year, the Ingolstadt, Germany-based brand said yesterday in a statement. The VW and Audi supervisory boards approved building the plant, the luxury-car division’s first in North America, at meetings yesterday.

‘Excellent Economic Basis’

“As an established carmaking location, Mexico offers an excellent economic basis for Audi production operations,” Stadler said in yesterday’s statement. “Good infrastructure, competitive cost structures and existing free trade agreements played a significant role in the choice.”

The decision comes about a year after Volkswagen opened a factory in Tennessee, the group’s only U.S. plant, to boost efforts to overtake General Motors Co. (GM:US) as the world’s biggest carmaker. BMW makes vehicles in South Carolina, while Mercedes assembles cars in Alabama.

Volkswagen also said it will build a new assembly plant in western China, to fuel the Wolfsburg, Germany-based carmaker’s expansion in the world’s largest auto market. VW’s supervisory board approved the new factory in Urumqi, China, yesterday, spokesman Michael Brendel said. The automaker will release details later, he said.

The VW plant would be the first set up by a western carmaker plant in that region of China, and is part of the manufacturer’s 10.6 billion-euro investment plan for the country through 2015. U.S. competitor Ford Motor Co. (F:US) said today that it plans to build a $760 million assembly plant in Hangzhou in eastern China that will double is production in the country to 1.2 million vehicles annually.

To contact the reporter on this story: Chris Reiter in Hamburg via creiter2@bloomberg.net Alex Webb in Munich via awebb25@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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