Volkswagen to spend $1 billion on Mexico assembly plant expansion for Tiguan

PUEBLA, Mexico (Reuters) - German carmaker VOLKSWAGEN (VOW.XE) will invest about $1 billion to expand its vehicle assembly plant in Mexico's Puebla state and prepare it for production of the new Tiguan compact crossover SUV, the company said on Monday.

The investment is focused on new high-technology assembly lines and will generate some 2,000 jobs, Andreas Hinrichs, chief executive of Volkswagen Mexico, said as he unveiled the expansion plan.

Production of the Tiguan will begin in late 2016 with the vehicles hitting the market the following year, Hinrichs said. Volkswagen will produce around a million of the vehicles at the plant over eight years, Hinrichs said, with some destined for the Mexican market.

As of December, investment in the auto sector in Mexico totaled $19 billion under President Enrique Pena Nieto, who took office two years earlier, according to government data.

Volkswagen, which opened its Puebla plant in 1964, last year produced 475,121 vehicles out of about 3.2 million autos manufactured in the country, Mexican Automotive Industry Association (AMIA) data show.

Mexico is the seventh biggest manufacturer of autos and the world's fourth largest exporter, according to AMIA. Over 80 percent of those vehicles are destined for sale abroad.

Total auto production increased 27 percent last year, compared with 2013, and AMIA has predicted that Mexico will produce more than 5 million vehicles by 2020.

(Reporting by Joanna Zuckerman Bernstein; Editing by W Simon and Tom Brown)

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