Mexico Automaking Marks Luxury Shift With New Audi Plant

Mexico’s automobile industry, once focused on small cars and pickup trucks, got a boost when Audi AG chose the country as the location for a new factory to build its Q5 sport-utility vehicle for the global market.

The announcement by the Volkswagen AG-owned carmaker on April 18 suggests that Mexico will be competitive in a wider range of automobile production including luxury models, said Armando Soto, president of Kaso y Asociados, a Mexico City-based auto industry consulting firm.

“The fact that Audi is coming to build luxury vehicles is going to reposition global perceptions of Mexico as a manufacturing platform,” Soto said in a telephone interview yesterday. “This sends a signal that Mexico can produce luxury vehicles very competitively. It’s not just production of small cars and pickups.”

Over the last 12 months, Mazda Motor Co. (7261), Honda Motor Co. (7267) and Nissan Motor Co. (7201) have also announced plans to build new factories in Mexico, where the industry is benefiting from the nation’s lower wages, proximity to the U.S. and free-trade agreements with more than 30 countries. Ford Motor Co. (F) said in March that it would invest $1.3 billion in its northern-Mexico plant to produce the new Fusion and Lincoln MKZ models.

The Audi factory, the company’s first in North America, will have an initial capacity of 150,000 Q5s a year, said Audi Chief Executive Officer Rupert Stadler at a briefing yesterday in Hamburg. The plant will begin operating in 2016.

Namesake Brand

“As an established carmaking location, Mexico offers an excellent economic basis for Audi production operations,” Audi said in a statement.

Audi will join German competitors Bayerische Motoren Werke AG and Daimler AG’s Mercedes-Benz unit in making SUVs in North America for delivery worldwide. The carmaker will choose a location for the Mexican plant later this year. Volkswagen’s namesake brand already has a car plant and engine factory in Mexico.

Mexico produced 2.68 million vehicles in 2011, up 14 percent from the year before, according to data compiled by Bloomberg.

Automobile export production during the first three months of 2012 rose 15 percent to 604,212 units, according to the Mexican Automobile Industry Association. Nissan, Volkswagen and General Motors Co. (GM) ranked as the top exporters during that period.

To contact the reporter on this story: Brendan Case in Dallas at bcase4@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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