New Audi plant approved, Mexico under consideration

Audi has confirmed plans to build a plant in North America but has stopped short of giving a location and an estimated time of arrival.

Audi of America President Johan de Nysschen told WardsAuto at the Detroit auto show last week, "It's not a matter of if we will do a plant in North America, but when."

With U.S. sales at an all-time high in 2011 (117,500 units) De Nysschen acknowledges a plant in a dollar zone is necessary to hedge currency volatility and bring economies of scale, "Getting a plant allows us to have a higher degree of U.S. content. It allows us to have a natural hedge against that."

The new Volkswagen plant in Chattanooga, TN that produces the North American market Passat was considered a prime location as Audi and Volkswagen models could share production lines. However, the location has fallen out of contention due to high export duties and conflicts with Volkswagen's own plans of expansion.

Instead, Audi is looking south to Mexico for its labor flexibility and lower-wages. Furthermore, Mexico is a prime location for export to South America and Europe. "One advantage of Mexico is that you could support the growing markets down in South America, Brazil," de Nysschen says fully aware of free-trade agreements between certain countries. "More so, you have the benefit of exporting cars into Europe duty-free."

De Nysschen affirmed, "The decision to do a plant, technically we've reached that conclusion. It's a matter now of waiting to pull the trigger."