Volkswagen will produce the next generation Golf for sale in North America at its plant in Puebla, Mexico, from the first quarter of 2014.

The company will begin expansion work early this year as part of a US$5bn investment in the US and Mexico. This is part of VW’s overall plan to spend US$68.2bn globally over the next three years on new plants and upgrading older facilities.

The group said in November that it will begin assembly of the Audi Q5 at a new plant in San José Chiapa, also in Puebla state, in early 2016. The Golf and the  Q5 model will be sold into the North and South American markets.

Board member Hubert Waltl said: “With its existing infrastructure, competitive cost structures and free-trade agreements, Mexico is the ideal location to produce the Golf for the American markets."

VW North America chief Jonathan Browning said that producing the Golf in Puebla puts Volkswagen closer to its goal of building more than 75% of the cars VW of America sells in the Nafta region.

The German carmaker will also open a new plant in Silao, Mexico, to manufacture 1.8- and 2.0-litre turbocharged EA888 engines.