Audi, owned by Volkswagen (IW 1000/10), announced plans on April 18 to build a new production plant in Mexico.
The exact location for the plant would be selected later this year and production of an SUV model would start there in 2016, a company statement said.
"Good infrastructure, competitive cost structures and existing free trade agreements played a significant role in the choice of Mexico," said Rupert Stadler, chairman of the board of management of Audi AG.
The group parent Volkswagen already has an automotive plant in Puebla and an engine plant in Silao, both in central Mexico.
"Production in North America is a critical factor in Audi's play for higher sales volumes in the United States and it also acts as a buffer from currency fluctuations that can negatively affect profit margins and price competitiveness," said Bill Visnic, a senior analyst from automotive website Edmunds.com.
Mexico is the second main producer and top exporter of automobiles in Latin America, with most vehicles destined for the U.S. market.
Audi also announced it would buy Ducati, the Italian maker of high-speed motorcycles.
Copyright Agence France-Presse, 2012