FRANKFURT (Reuters) -- Audi picked San Jose Chiapa as the site for its new plant for SUV in Mexico, taking advantage of parent Volkswagen Group's suppliers in the region, as the luxury marque seeks to boost its presence in the United States.
Audi said the new factory would have an annual production capacity of about 150,000 vehicles and that the Q5 SUV would be built there starting in 2016.
The plant site is close to VW brand's existing manufacturing operations in Puebla, which build the Beetle and Jetta.
Audi CEO Rupert Stadler, in a statement, said: "The production site in San Jose Chiapa meets various key requirements of our global growth strategy and we can step up our activities in American markets."
Audi said the location "is an ideal base from which to supply international markets."
Audi's statement didn't specifically refer to using VW's existing supply chain, but mentioned "site conditions, logistics links, infrastructure, well-qualified employees and living quality -- these were the decisive criteria for the choice of location."
Audi said earlier this year it planned to build a factory in Mexico - its first in the Americas - in a step designed to take advantage of low labor costs and an exemption from import duties in some regions there.
The new plant will bring VW closer to rivaling Nissan in volume in Mexico and help Audi catch up with BMW and Mercedes in the United States. The two German competitors have had production footprints in the world's No.2 auto market since the 1990s and each sell about twice as many cars there as Audi.
Ramping up regional production and purchasing may also help VW to reduce its exposure to unfavorable currency fluctuations, which have long weighed on the carmaker's results in the United States, where it aims to return to profit next year.
VW has started building a second Mexican factory in Silao in 2011 to produce 330,000 engines per year to furnish regional vehicle production. A VW factory in Chattanooga, Tennessee to make U.S. versions of the Passat mid-sized sedan was opened last year.
A member of the North American Free Trade Agreement (NAFTA), Mexico has favorable wage costs and is exempt from import duties. It also has a free trade deal with the European Union.
Mexican auto production and exports rose in July from the same month a year earlier, the Mexican Auto Industry Association (AMIA) said in its latest report, in a positive sign for the country's economy.
Almost 68 percent of the vehicles exported went to the United States, Mexico's main trading partner, compared to 64 percent in July last year.
VW has said it expects production at its Mexican facilities to rise 20 percent this year to 615,000 vehicles from 2011, compared with expected Mexican economic growth of at least 3.5 percent.
VW, which has pledged to become the world's biggest auto manufacturer no later than 2018, has a goal of boosting group vehicle sales in the United States, the world's second largest car market, to 1 million by 2018, with 200,000 units from Audi.
Philip Nussel contributed to this report.