Volkswagen plans to build electric vehicles in Mexico with an initial $750M investment

Volkswagen is moving ahead with plans to build electric vehicles in Mexico. Holger Nestler, president and CEO of Volkswagen Mexico, says the automaker will provide two investment packages to advance EV production.

Volkswagen to build electric vehicles in Mexico

Speaking with Forbes Mexico, Nestler said the goal is not only to produce EVs, but to build them more sustainably.

Volkswagen will invest $750M, the first of two packages, to transform its facility in Puebla. The VW plant in Puebla is the largest auto factory in Mexico and one of the biggest within its network.

The plant currently produces models including the Jetta, Beetle, Golf, and Tiguan Long Version.

Nestler explained in the interview that Volkswagen plans to produce electric vehicles in Mexico. He added, “But first we have to start with a transformation of the industry.”

VW Mexico’s leader said the automaker is upgrading its facility to include “state-of-the-art technology.” According to Nestler, “large investments” will be made over the next one to three years to develop new electric models.

The second investment package, which will be revealed in early 2024, involves an electric vehicle that will be built in Mexico. Nestler said the package would include a significant amount of money without giving specifics.

Volkswagen Mexico’s president says the new model to be produced at the plant will be introduced in the next 12 to 15 months. Nestler states the EV will be built for Mexico, the US, and Canada.

The news comes after Tesla confirmed it was pumping the brakes at Gigafactory Mexico amid worries over the global economy. CEO Elon Musk said in early October:

And in Mexico, we’re laying the groundwork to begin construction and doing all the long lead items, but I think we want to just get a sense for the global economy is like before we go full tilt on the Mexico factory. I am worried about the high interest rate environment that we’re in.

More recently, Gigafactory Mexico said it had all the permits needed to begin construction. It was just waiting on Tesla to give it the green light.

Electrek’s Take

It’s interesting to see Volkswagen moving ahead with plans to build EVs in Mexico despite delays in its home market.

Volkswagen halted production of electric models at two German plants last week. The halt impacts EVs including the VW ID.4, ID.7, and Audi Q4 e-tron. The automaker blamed a lack of electric motors as the cause of the production halt.

The new “made in Mexico” EV would not qualify for the IRA tax credit, but it would still cut down on shipping to North America significantly.

Volkswagen currently assembles the ID.4 electric SUV at its Chattanooga, TN facility. Production began last July. Its flagship ID.7 electric sedan will go on sale next year.