Otto Lindner, Chairman of the Board of Management of Volkswagen de México, Juan Manuel Oliva Ramiréz, Governor of the state of Guanajuato, Felipe Calderón, Mexican President

Otto Lindner, Chairman of the Board of Management of Volkswagen de México, Juan Manuel Oliva Ramiréz, Governor of the state of Guanajuato, Felipe Calderón, Mexican President

Volkswagen Group is to open a new plant in Silao in the central Mexican state of Guanajuato as part of its long-term expansion strategy, the company has said.

Otto Lindner, chairman of the board of management of Volkswagen de México, announcing the decision this Wednesday in Mexico City, said construction works are set to begin this year. From 2013 engines will be produced on site in Silao.

"North America is and remains one of the biggest and most important markets for the automotive industry," said Prof. Dr. Jochem Heizmann, member of the Volkswagen Aktiengesellschaft board of management for group production.

"The current expansion of capacity of the plant in Puebla, the upcoming start of production in Chattanooga, as well as the opening up of the new engine plant in Silao, clearly shows how Volkswagen AG is going on the offensive in North America as well."

The Volkswagen Group is planning sales of 1m vehicles in the US annually from 2018. The core elements of this strategy are vehicles tailored to the demands of US customers, such as the new Jetta or the new Midsize Sedan, which are produced in North American plants with a high degree of localisation.

From 2013, the new plant in Silao will supply engines of the latest generation to the vehicle plants in Puebla, Mexico and Chattanooga in the US. The new plant in Puebla is designed for an annual capacity of 330,000 engines.

The investment volume for the development of the new engine as well as for building the new site comes to a total of US$550m, Volkswagen said. It will create approximately 700 jobs over the medium term on site in Silao.

In addition, further jobs will arise in the region with suppliers and in the area of logistics. The Volkswagen Group selected Silao as the new engine site because in addition to having a qualified work force and a developed supplier structure, the region offers a site of 60 hectares which is already developed and has an existing transport infrastructure.

Lindner said: "In over 40 years our plant in Puebla has developed into one of the largest vehicle plants in the Group. The decision to open up a second site in Mexico is the next logical step as part of our expansion strategy."

Currently, the Volkswagen Jetta, Golf estate and the New Beetle are produced in Puebla, Mexico.

From 2011, production of the New Midsize Sedan will begin in Chattanooga, Tennessee in the US.