Volkswagen’s Mexican unit is set to axe 800 jobs at its plant in Puebla, which will also have a shutdown in March and an extended Easter break.

The company said that production in Mexico could be cut by up to 20% this year, with output of some models at Puebla reduced to a single shift to reduce inventories.

The line in Puebla manufactures the Beetle model range.

According to local industry groups, production in Mexico could fall by up to 20% in 2009.