Volkswagen’s Chattanooga plant is slated to start production of the Atlas sport utility vehicle next month.
Volkswagen on Tuesday unveiled plans to assemble electric vehicles in North America starting in 2021, potentially putting production of battery-powered cars in Chattanooga.
"I think the Chattanooga plant is the top candidate," said Jesse Toprak, chief executive of automotive research site Carhub.com.
Dr. Herbert Diess, the Volkswagen brand's worldwide chief, said the German automaker will make considerable investments in electric vehicle infrastructure over the next few years.
"We will be significantly stepping up our activities in the USA," he said in a statement, adding that the main focus will be on key segments such as large sport utility vehicles. "In a second stage, we will then take our new electric cars to North America."
Diess also said it would drop diesel vehicles in the United States, which formerly made up a quarter of the brand's U.S. sales.
"At the moment we assume that we will offer no new diesel vehicles in the U.S," Diess told European business daily Handelsblatt.
While VW also has a production plant in Mexico, Toprak said the U.S. is likely to be the largest electric vehicle market in the region.
"It makes distribution easier," he said about Chattanooga plant production. "It makes logical sense."
VW laid out the brand's future strategy not only in North America but worldwide as it tries to bolster both sales and profitability. The brand's Board of Management has decided on a program dubbed Transform 2025+, which will set its course over the next decade and beyond, according to the automaker.
The new strategy focuses on clearer brand positioning across regions and segments, backed by improvements in efficiency and productivity. At the same time, the brand will make "massive investments in e-mobility and connectivity," the company said.
Toprak said the Chattanooga factory has proven itself in terms of production and quality, having assembled the Passat midsize sedan since 2011. Next month, the factory plans to ramp up production of the Atlas sport utility vehicle.
"VW's plan is very concentrated and serious," Toprak said, adding that VW has plans to produce about 30 EVs over its entire vehicle lineup.
Several of those new battery-powered vehicles will be under the VW brand and Toprak sees "at least a couple of those produced in the Chattanooga plant."
While electric vehicle sales have stalled due to low gas prices, he foresees a time when the vehicles' price point will be at least the same as gasoline-powered autos.
"Then it starts making financial sense," Toprak said. "With economies of scale, the price of EVs will go down. That will bring in more practical buyers in the marketplace."
At the Chattanooga plant, electric vehicles will need to be assembled on a separate production line because many of the components are different from autos with gasoline engines, he said.
Alan Brown, a Texas VW dealer who heads the brand's dealer council in the U.S. and toured the Chattanooga plant earlier this year, said he sees new product coming from the factory after production of the Atlas SUV.
He said a factory as large as Chattanooga's VW plant can't just build one or two vehicles.
"That is built for the future," Brown said about the factory.
The Chattanooga plant is amid efforts to hire up to 1,100 new production workers by mid-April for SUV production. That would put the plant's headcount at about 3,400, according to officials.
Over the past couple of years, VW invested $900 million into the plant and the SUV, the company said.
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