VW Tennessee

German automaker Volkswagen has announced that it will invest $US800 million ($A1.1 billion) to build a new electric vehicle factory alongside its existing auto plant at its Chattanooga, Tennessee manufacturing facility.

The announcement was made on Monday at the Detroit Auto Show by Volkswagen AG CEO Herbert Diess, who said the factory would produce mass-market electric cars in its ID series, including the ID Cross SUV and its new EV Kombi, to be known as the ID Buzz.

It was followed up with a press release from VW America, in which Diess named the US as “one of the most important locations” for the European company, and said producing EVs in Chattanooga was a key part of its growth strategy in North America.

The news has been welcomed by Tennessee governor Bill Haslam, who had previously let on in December that the state was “in the middle of serious conversations” with the automaker about adding the capability to build electric cars to its Chattanooga facility.

“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,” Haslam said in a statement to the press.

The facility currently employs around 3,500 staff and the expansion will mean 1,000 more jobs will be created.

VW’s electric cars will be built using the modular MEB platform, which Diess has previously said will allow the automaker to reduce production costs for its flagship all-electric Golf by 40 per cent.

The expansion of the facility in Tennessee underlines the automaker’s plans to make 15 million EVs and halt all ICE car production by 2026.

To do this, it is upgrading three other plants including Zwickau (where it says it will start EV production before the end of this year) and Anting in Germany; and Foshan, China by 2020, with Emden and Hanover to commence EV production by 2022.

Globally, VW are committing $US50 billion ($US70 billion) until 2023 to development of its electric vehicle and digital services strategy, and hopes to sell 150,000 EVs by 2020 and over 1 million by 2025.

“The management team, led by Scott Keogh, is committed to continuing to increase our market share in the coming years. 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 US,” Diess says.

Diess says that VW will continue to broaden its footprint in the US, a move that is welcomed by CEO and president of Volkswagen Group of America Scott Keogh.

“We could not be prouder to build the future of mobility here in the US,” he said in a statement.

“We’re known as ‘the people’s car’ for a reason, and our EVs will build on that tradition.”

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