FRANKFURT (Bloomberg) -- Mexico's automobile industry, once focused on small cars and pickups, got a boost when Audi chose the country as the location for a new factory to build its Q5 premium SUV for the global market.
The announcement by the Volkswagen Group premium brand on April 18 suggests that Mexico will be competitive in a wider range of automobile production including luxury models, said Armando Soto, president of Kaso y Asociados, a Mexico City-based auto industry consulting firm.
"The fact that Audi is coming to build luxury vehicles is going to reposition global perceptions of Mexico as a manufacturing platform," Soto said. "This sends a signal that Mexico can produce luxury vehicles very competitively. It's not just production of small cars and pickups."
Over the last 12 months, Mazda, Honda and Nissan have also announced plans to build new factories in Mexico, where the industry is benefiting from the nation's lower wages, proximity to the United States and free-trade agreements with more than 30 countries.
Ford Motor said in March that it would invest $1.3 billion in its northern-Mexico plant to produce the new Fusion and Lincoln MKZ models.
The Audi factory, the company's first in North America, will have an initial capacity of 150,000 Q5s a year, said Audi CEO Rupert Stadler on Thursday. The plant will begin operating in 2016.
"As an established carmaking location, Mexico offers an excellent economic basis for Audi production operations," Audi said in a statement. Audi will join German competitors BMW and Mercedes-Benz in making SUVs in North America for delivery worldwide. BMW's and Mercedes's factories are in the United States.
Audi will choose a location for the Mexican plant later this year. Volkswagen's core VW brand already has a car factory and engine plant in Mexico.
Mexico produced 2.68 million vehicles in 2011, up 14 percent from the year before, according to data compiled by Bloomberg. Automobile export production during the first three months of 2012 rose 15 percent to 604,212 units, according to the Mexican Automobile Industry Association.
Nissan, Volkswagen and General Motors ranked as the top exporters during that period.