Volkswagen has announced it will invest $1bn to expand its vehicle assembly plant in Mexico’s Puebla state, which the company first opened in 1964.
The German carmaker is using the investment to prepare for the production of the new Tiguan compact crossover SUV.
The investment is focused on new high-technology assembly lines which will generate 2,000 jobs.
New lines will be installed at Puebla for the SUV addition, with the new body shop set to include a high level of automation with advanced programming and control systems.
Production of the Tiguan will begin in late 2016, with the vehicles hitting the market in 2017.
Volkswagen expects to produce about a million of the vehicles at its Mexican plant over eight years, with some destined for the Mexican market but the majority for export.
Volkswagen claimed the project would add around $1bn a year to its auto parts purchasing volume in Mexico and create a significant impact on the local economy and employment.
Last year Volkswagen produced 475,121 vehicles out of the approximate 3.2m automobiles manufactured in Mexico, which makes Mexico is the seventh biggest automotive manufacturer in the world. It is also the fourth largest exporter, with over 80% of its vehicles sold abroad.
Total auto production in Mexico increased by 27% last year, and the Mexican Automotive Industry Association has predicted that the country will produce more than 5m vehicles by 2020.