Volkswagen Group Opens New Engine Plant in Silao, Mexico

Earlier this week, Volkswagen Group officially opened their new engine factory in Silao, Mexico. Even more significant is that the Silao Engine Facility is the 100th factory worldwide within the Volkswagen Group. This was a significant event for Volkswagen and made even moreso by the attendance of the President of Mexico, Enrique Peña, on hand with Dr. Winterkorn to official start production at the new facility. The Silao facility will initially produce 330,000 engines per year for the North American region. However the plant can be expanded to build upwards of 1 million engines each year. The first two engines to be produced are the all-new EA888 1.8TFSI and 2.0TFSI. Officials at the plant say that they could easily produced 2.0l TDI engines as well, so there is quite a bit of room for expansion. This new facility also helps localize production in the North American region and these engines will be utilized in products built at Volkswagen’s Puebla and Chattanooga facilities as well as Audi’s forthcoming new factory in San José Chiapa, Mexico.

So far we know Volkswagen will replace the 2.5l inline-5 engine in the Jetta and Beetle with the new 1.8TFSI making 170hp. We also expect the 1.8TFSI to find its way into the Golf 7 when it arrives in early 2014. As for the Passat, Volkswagen is making a final decision whether or not to use the 1.8TFSI or 2.0TFSI as the new base engine. Either way, the Passat’s 2.5l inline-5 will be replaced some time later this year. The 2.0TFSI found in the current Jetta, GLI and Beetle Turbo will be replaced with the newer version produced in Silao later this spring and horsepower will increase to 210hp stock. Expect improvements in fuel economy across the board with these new engines (final EPA testing isn’t quite complete yet). Overall Volkswagen is laying the ground work to localize production here in North America as much as possible. The new engine facility will be able to supply a healthy number of engines to both VW and Audi and help push Volkswagen Group brands towards their 1 million cars per year sales goal in 2018.

We will have a separate technical article on the new 1.8TFSI (and indirectly the 2.0TFSI as there is only a 10% difference in parts between them) next week. Volkswagen’s press release on the opening of their new Silao engine factory follows below…

Volkswagen Group opens new engine plant in Mexico

– President of Mexico, Enrique Peña, and Prof. Dr. Martin Winterkorn inaugurate Group’s 100th plant worldwide in Silao

– With a maximum annual capacity of 330,000 engines, factory strengthens production network in North America

Wolfsburg / Silao, 15 January 2013 – Volkswagen is further extending its commitment to industry in North America. The engine plant in Silao in the central Mexican state of Guanajuato was opened today. The new factory is the Volkswagen Group’s 100th plant worldwide. The inauguration ceremony was attended by the President of Mexico, Enrique Peña, the Governor of the state of Guanajuato, Miguel Marquez, and Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft. The factory will supply Volkswagen’s North American vehicle plants in Puebla/Mexico and Chattanooga/USA with modern and fuel-efficient TSI engines produced locally in Silao.

Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft, commented: “The Silao factory is the Volkswagen Group’s 100th plant and therefore represents one of the largest and most international production networks in the automotive industry. With this new plant we are driving our ambitious major North American offensive forward. Over the next three years the Volkswagen Group will be investing more than USD five billion in North America alone. Silao is thus also a strong symbol of our uninterrupted growth trajectory and the Group’s continuing internationalization.”

Strengthening its market position in North America is an essential component of the Volkswagen Group’s global growth strategy. In this context, the company is planning annual sales of one million vehicles in the USA alone from 2018 based on models such as the Jetta, the Beetle and the new US Passat tailored to the demands of US customers which are produced at the North American plants with a high degree of localization.

With the start of engine production in Silao, Volkswagen is continuing its success story in Mexico that already spans almost 60 years. Along with the Volkswagen plant in Puebla, the MAN commercial vehicles plant in Querétaro and the planned Audi vehicle plant in San José Chiapa scheduled to begin production in 2016, the Group remains a key growth driver for Mexican industry.

Going forward, Silao will supply the North American vehicle plants in Puebla und Chattanooga with the latest generation of fuel-efficient TSI engines. The plant is designed for a medium-term annual capacity of 330,000 units. Investment runs at USD 550 million. Volkswagen will be creating over 700 new jobs at the 60 hectare plant in Silao in the medium term. Further jobs in the region will also be created at suppliers and in the service sector.

Engine production in Silao meets the high environmental standards of the Volkswagen brand’s “Think Blue. Factory” program. The aim of this program is to make more efficient use of resources and to achieve a sustained reduction in production-related emissions at all Volkswagen plants. As a result, all manufacturing equipment in Silao complies with the latest energy efficiency standards, thus achieving a significant reduction in the environmental impact of each produced engine. Special rooflights in the production halls, for example, combined with energy-efficient lighting throughout the facility ensure optimum natural light levels and simultaneously absorb the heat generated by the lighting system. The improved-performance TSI engines (EA 888) from Silao combine fuel economy and improved emissions with lower weight.

The CEO of Volkswagen de México, Andreas Hinrichs, drew attention to the Mexican automotive industry’s growth path in 2012 and to Volkswagen’s contribution consisting of over 600,000 vehicles produced in the country. “For us, Silao is a big step towards the future. Volkswagen is once again generating strong momentum for growth and employment in the Mexican automotive industry.”

Volkswagen de México currently builds four models for world markets at the Puebla plant. These are the Volkswagen Jetta, Golf Estate, Beetle and Beetle Cabrio. A total of 604,000 vehicles were manufactured in Puebla in 2012. Production of the US Passat developed specifically for the American market began in Chattanooga, Tennessee, in 2011. Over 150,000 vehicles already left the assembly line there in 2012.