Volkswagen has said it will start making the Golf hatchback at its Puebla facility in Mexico in the first quarter of next year for distribution to the North and South American market. Sales of the Golf in the US last year were just more than 38,000 met by exports the model from Germany, where it is produced at the Wolfsburg and Zwickau assembly plants.
The move to Mexico will mean savings in volume shipments as well as the removal of costly currency fluctuations between the dollar and euro associated with vehicle imports.
Sales of VW and Audi-brand vehicles increased 31% to 580,200 cars in the region last year and the German carmaker said it is planning sales of 1m vehicles in the US alone by 2018.
The Golf will join the Beetle, Beetle Convertible, Jetta and Jetta SportWagen at Puebla (as well as engine and component production), though the carmaker would not discuss volume output from the plant when production begins or any investment in extra capacity being made beforehand.
What the carmaker’s North America chief Jonathan Browning did say was that producing the Golf in Puebla would allow it to make “further strides towards the goal of building more than 75% of the cars Volkswagen of America sells in the North American region.”
The carmaker also told Automotive Logistics News that finding logistics capacity was not a big issue but it was rather “finding the right quality at the right price”.
According to industry analyst IHS Automotive, production in Mexico is set to add nearly 1.5m more units of production in the next four years, and some North American-based carmakers have expressed worry that finding capacity will be a pressing issue.
“Overall, there in concern in our industry that there isn’t enough equipment and there is a lack of trained drivers,” said a spokesperson for Volkswagen. “We work with our trucking companies on long-term forecasting to allow them to ensure they can cater to our growth. Furthermore, we do have a dedicated capacity management that allows us on a tactical level to substitute capacity.”
The spokesperson went on to say that capacity constraints on the rail network were being addressed directly and in industry forums.
“On the Mexico-US rail leg, we utilise dedicated Automax rail equipment to protect us from equipment shortages,” said the spokesperson.
VW Puebla is currently the biggest car factory in Mexico. In 2012, the plant produced 604,000 vehicles, setting a new production record. Approximately 84% of this volume was exported to the world markets
VW investment in Mexico
The decision to manufacture the Golf there is part of a $5 billion investment that the carmaker is making to build its presence in the American market over the next five years. That investment also includes the new Audi plant being built in Mexico at a site in San José Chiapa.
VW also recently opened a new $550m engine plant at Silao in Mexico that will supply the 1.8- and 2.0-litre turbocharged EA888 engines to the Puebla assembly site from the end of February, as well as to the Chattanooga plant in Tennessee later this year. DHL is providing the road transport services for the delivery of the engines to Puebla.
In November last year, VW also improved its distribution of vehicles from the Puebla plant, with a $1.27m investment in the consolidation of ‘by-pack’ operations – the parts and components that are normally added to the car on arrival at the dealership, including such things as hubcaps, the owner's manual and windscreen wipers. VW said the inclusion of the parts packaging process at the warehouse will meet the high standards of its new logistics concept now being implemented throughout the group (read more).
Furthermore, VW’s modular global platform strategy (MQB) means that the shift in production will not necessitate any major upheaval in the existing assembly at the plant. By 2017 VW aims to have more than 40 models built on the platform, including Audi, Skoda and Seat models. The Golf is one of the first vehicles built off the MQB, along with the Audi A3.
VW has more than 50 parts suppliers located within a 50km radius of the Puebla plant, with 20 of the most important sited in the industrial parks that sit next to the plant. It has a total of 230 or so suppliers in Mexico and Volkswagen de México covers about 50% of its purchasing requirements from these suppliers.
Golf strengthens sales
Last year VW passenger cars performed particularly well in the US, where 438,100 vehicles were handed over to customers, up 35% on the previous year. In South America, deliveries went up by 8.3% to 836,600 vehicles, of which 661,000 were handed over in Brazil.
“There has been another strong increase for the Volkswagen Passenger Cars brand even though market conditions were at times difficult. Our new Golf has got off to an excellent start and significantly strengthened Volkswagen’s competitive position,” said Christian Klingler, board member for Sales and Marketing for the Volkswagen Group and Volkswagen Passenger Cars.