VW meeting on new US production plant, may expand Chattanooga plant, report says

Staff Photo by Matt Hamilton / Vehicles roll off the line Oct. 14 during the launch celebration for the Volkswagen ID.4 electric SUV at the Chattanooga Volkswagen assembly plant.

With federal government incentives spurring foreign automakers to eye more U.S. production, Volkswagen on Friday is expected to discuss a new American assembly plant for its Scout brand, according to a report.

VW's supervisory board in Germany is expected to approve the project, according to Reuters, citing an unidentified source.

No site for the plant is identified, but the report also said VW is looking to expand its existing Chattanooga plant to produce the ID.Buzz, the electric van that's viewed as the spiritual successor to the once-popular Microbus.

At the same time, VW has plenty of acreage next to its Enterprise South industrial park plant to mirror its factory, should the company make the investment. A new assembly plant likely would bring several thousand new jobs to wherever it lands.

The future Scout brand of electric trucks and SUVs is expected to be designed for U.S. buyers, with production to start by 2026.

Stuart McWhorter, the commissioner for the Tennessee Department of Economic and Community Development, said the Inflation Reduction Act and other federal incentives are encouraging more U.S. production of electric vehicles and related suppliers, and Tennessee is well positioned to benefit from such business expansion.

McWhorter said in an interview Monday that he's traveling to Germany later this month and he'll meet with Volkswagen officials during his trip.

"I know they are assessing their growth and looking at a lot of options, and we're here to help them as they move forward," McWhorter said during a visit to the Hamilton County Business Development Center.

He declined to discuss VW's proposed Scout project, but he said the German automaker "has lots of capacity" at the Chattanooga assembly plant site in Enterprise South.

Karl Brauer, executive analyst for the search and research company iSeeCars, agreed that the Inflation Reduction Act passed last year by Congress is prompting foreign automakers to rethink production plans. Part of the measure called for more domestic assembly and sourcing requirements for electric vehicles to be eligible for federal tax credits.

Brauer said in a phone interview that while an automaker may have planned to assemble a vehicle in Europe, now they may build more capacity in the U.S.

"It makes sense there should be careful consideration where they want to produce things ... and to leverage U.S. facilities," he said.

Michelle Krebs, executive analyst for the auto data and services company Cox Automotive, said by phone the Inflation Reduction Act and the infrastructure bill passed earlier in 2022 are helping drive a transformation in the industry.

"It's a massive investment," she said. "Nothing in my career has been like this."

Chattanooga is sitting amid more than $30 billion of announced new or planned investments in electric vehicles by auto companies and battery makers in Tennessee and Georgia alone.

Volkswagen already spent $800 million in Chattanooga to expand its plant for production of the ID.4 electric SUV, which was launched at the factory in mid-2022. The company plans to roll out about 90,000 of the vehicles in 2023.

The plant employs about 4,700 employees. The company hired about 1,000 people over the past year or so for the electric vehicle and for assembly of the conventionally powered Atlas SUVs.

While Reuters reported Volkswagen is looking at expanding its existing Chattanooga factory to produce the ID.Buzz, it added that the Scout brand will require a new platform and the Tennessee plant does not have enough space to do it all.

Meanwhile, Audi CEO Markus Duesmann told the German publication Frankfurter Allgemeine Sonntagszeitung last month that the Volkswagen Group luxury brand is looking at a plan for a U.S. manufacturing plant for Audi electric vehicles that could be shared with Scout.

Duesmann stated in an interview that no decision had been made yet, but incentives built into the Inflation Reduction Act signed into law last August made it an attractive time to build a plant in the U.S.

McWhorter said the federal government with its tax credits is encouraging automakers to reach out to their supplier networks to make sure they are close.

"The amount of interest is still high and our pipeline is still strong," he said. "We've had a lot of success, especially in this part of the state."

Business Editor Dave Flessner contributed to this story.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.