Volkswagen to Invest $800 Million in Electric Vehicle Plant in the U.S.

author: Eric Walz   

An aerial view of Volkswagen's auto plant in Chattanooga, Tennessee.

German automaker Volkswagen AG has announced that its Chattanooga, Tennessee manufacturing plant will become the company's first electric vehicle production facility in North America, state officials announced Monday.

The $800 million project by the automaker is expected to generate 1,000 new jobs. Volkswagen expects to roll out its first Volkswagen electric vehicle, the ID Crozz SUV at the Chattanooga facility in 2022.

"The U.S. is one of the most important locations for us, and producing electric cars in Chattanooga is a key part of our growth strategy in North America," said Volkswagen AG CEO Herbert Diess in a statement. "Together with our ongoing investments and this increase in local production, we are strengthening the foundation for sustainable growth of the Volkswagen brand in the U.S."

The Chattanooga site will be the first dedicated location in North America for production of a vehicle using Volkswagen's modular electric toolkit chassis, or MEB. The new architecture consolidates all of the vehicle's electronic controls and reduces the number of microprocessors.

The MEB platform is designed be shared among upcoming VW electric models. The automaker says it might become the foundation of up to 10 million electric models it plans on building.

The 2018 Volkswagen ID Crozz Concept

As the company moves towards electrifying its lineup, Volkswagen is also building new EV production facilities in Europe and China. China is the company's biggest market.

In Europe, Volkswagen is building its first dedicated EV production facility in Zwickau, Germany, starting production by the end of this year and will add EV production facilities in the German cities of Emden and Hanover by 2022.

Volkswagen will also build EV-production facilities in China next year.

"The shift toward electric vehicles is a trend that can be seen worldwide, and Volkswagen's decision to locate its first North American EV manufacturing facility in Chattanooga underscores Tennessee's manufacturing strength and highly-skilled workforce," said Tennessee Gov. Bill Haslam said.

Volkswagen expects to sell 150,000 electric vehicles by 2020 and 1 million by 2025. In addition to Chattanooga, the company is also building an electric vehicle facility in Zwickau, Germany, and is adding electric vehicle production to two plants in China and to two other facilities in Germany.

"Today's announcement is a tremendous win for Tennessee as it shows that our state continues to be a prime location for foreign direct investment," Department of Economic and Community Development Commissioner Bob Rolfe.

The automaker employs 3,500 people in Tennessee and by the end of 2019 will have invested $2.3 billion in the facility. The Chattanooga plant currently produces the midsize Atlas SUV and Passat sedan. Production of the Atlas Cross Sport, a five seat version of the SUV is scheduled to begin this year.

The new plant will help Volkswagen to ramp up its global electric vehicle production. Global sales of new electric vehicles reached 1 million in 2017, which could hit 4 million by 2020, according to a 2018 McKinsey & Co. report.

China remains the leader in electric vehicle sales, with a larger market than the U.S. and Europe combined. China also happens to be Volkswagen's biggest market. The automaker sold over 4 million vehicles in China last year.

State officials said they could not yet provide information on any financial incentives for the electric production and that they are still completing negotiations. The agreement will be made public once the project is contracted. The Chattanooga plant has received more than $800 million in federal, state and local incentives in the past decade, according to the Chattanooga Times Free Press.

Volkswagen Group of America's CEO Scott Keogh will lead the Volkswagen electric vehicle management team, Diess said.

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.