By on January 25, 2013

North American insufferable Volkswagen d-bags fans who proudly reject Mexican made Jettas in favor of German-assembled Golfs will be crying in their beers over news that North American made versions of the MK7 Golf will be built south of the border.

By building Golfs at VW’s Puebla plant, the auto maker can rely on additional capacity to supplement their German plants, which are running at full tilt to produce the latest Golf. Mexico is also a convenient location for Volkswagen to help grow sales of the Golf, as part of its plan for 800,000 sales in the U.S.

Jonathan Browning, head of Volkswagen’s North American arm, said in a statement that the company was looking to build 75 percent of the cars it sells in North America. Production of the Golf should begin at Puebla in Q1 2014.

The question in my mind is this; previously, the Golf was positioned as a more upscale small car, versus the volume oriented Jetta. Now that both Mexican production and the MQB platform can provide significant cost and exchange rate savings, will the Golf still occupy this slot, or can we expect a pricing strategy more akin to the Jetta, with a couple decontented base trim levels to get buyers in the door?

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53 Comments on “Volkswagen To Build Golf In Mexico For North American Market...”


  • avatar

    So, that’s how the die is cast. Sad day for VW Brazil. Looks like we’ll be stuck with our outdated Gols, Polos, Foxes and (soon) up!. Guess the Golf will land here costing about 70 000 reais (35k USD). And there will be people buying them!

    • 0 avatar
      th009

      There really was no chance of it being built in Brazil, unfortunately. Mexico has free-trade agreements with US, Canada and the EU, Brazil does not. So in addition to the increasing labour costs in Brazil, the lack of free trade makes it unattractive for VW and others to build cars for export there.

      • 0 avatar

        Hey th009!

        In spite of all that (and you are not wrong), the segment is not a small one in Brazil. In recent years, due to appearance of cheaper offerings of the same size (and less price) like Renault Logan, Chevy Cobalt etc. it has grown smaller. A gen7 Golf could easily take 1st as there are many people who love VW and would love to get their hands on one but are (smartly) avoiding the gen4.5 on sale as it can’t compare to the more recent offerings from others.

        To wit (model name, position in market in 2012, total sales 2012 according to Matt Gasnier most excellent compilations)

        Ford Focus (46) 24k
        Hyundai i30 (44) 19k
        VW Golf (56) 15k
        Chevrolet Cruze Hatch (60) 13k
        Peugeot 308 (61) 12k
        Fiat Bravo (68) 10.5k

        So direct competitors (even if I forget a few) sold over 94k cars. Cars of similar pricing will easily double that number. How many Golfs did VW sell in US? Jettas?

        Does VW really think it can walk away from this market? If you know a little of Brazilian car market, this seems a lot like the Voyage debacle of a few years back, when VW abandoned the small sedan market just as it was about to explode and let other reap the profits and watched Fiat overtake their 1st place in market. Fiat has been leader for 11 years. The Voyage was absent from market for 11 yearrs. Though the time frames are not identical, I don’t think it’s a coincidence.

        Brazil used to be VW’s second largest market. They sold 768k cars here last year. In their grand plans they want to sell 800k in NA in I don’t know how many years. They could have that number in Brazil much soner. Why treat this market as second class in spite of all the difficulties?

        Seems to me there’s more money to be made here than in NA at the 800k sales level.

      • 0 avatar
        th009

        Marcelo, there is no doubt the Brazilian domestic market is significant — my point was that at this time Brazil doesn’t offer a strong option as a base for automotive exports. And Golf will be exported … roughly 30K units in the US, and 15K in Canada, prior to any increases from price reductions. Add in Mexican domestic sales — and if the the free-trade tiff is resolved, Brazilian production.

        It makes sense to focus a model such as the Golf in a single location in the Americas, and in this case Mexico makes the most sense. Other models, such as the Gol, Polo, Vento or Transporter T6 would be much better candidates to focus on in Brazil and export to at least Mexico and Mercosur.

        In the end, I think we should consider the Brazilian domestic market separately from the export plans. And unfortunately Ms Rousseff’s policies have made the latter less attractive.

      • 0 avatar

        Touché th009!

        I agree. The Brazilian market is and will be (for the foreseeable future) an oddity. We are a continental country and like most countries like that (US, Russia, China) we are quite insular. I have to drive about 18-20 hours direct to reach the nearest neighboring country. Brazilians are isolated and quite immune from foreign influences (see music, food, art all pretty much home grown).

        All of that to say that, in cars, we’re used to paying through the nose and think it must be like that. When the guv lowered taxes on cars the (dis)intelligentzia got all riled up. THe business class of the nation is up in arms that the guv is strong arming energy companies to lower prices…

        I think it was Raymond Faro (sp??), the French political scientist who once said that Spain and Portugal are 20 yrs behind the rest of Europe. And that Latin America is 20 yrs behind the Iberian twins. That would put us in a mental climate of around 50s and 60s Europe. Cold War and all. Things are changing, but slowly. With our Euro-phyliac upper class (though I personally think in many respects it’d be better for us to emulate the US and not Europe), they believe in dirigisme and will continue to practice it.

        So, whether I agree with Mde Rouseff or not is irrelevant. I have little say. I have tired of going against the grain. In that way, and since Brazil can’t (won’t) change, I think VW is missing an opportunity. With a Brazilian made g7 Golf (exportable to Argentina-Mercosur, and Colombia-Venezuela, Andean Pact, Chile), VW could be on the cusp of 800 to 850k cars a year (not counting exports). They could handily defeat Focus, Bravo, 308, C4. As it stands, the Cruze hatch will pass VW next year. The 308 also stands a chance. The Golf 4.5 is disappearing. As will VW, unless they plan to unleash that Datsun-Dacia fighter in Brazil.

        I agree with you. It’s just not my subjective and objective reality. Let’s see the up!. Maybe that’1l be enough to pass Fiat (who will be having a tough year due to new model drought).

        Sorry for rant.

      • 0 avatar
        th009

        Marcelo, I agree with your analysis, and you should know well anyway, you live in Brazil, I have only visited briefly!

        I recall reading a while ago that VW was negotiating to build a new factory in Pernambuco — did anything come of that?

        My thinking here is that if they were to build additional manufacturing capacity and increase exports to Mercosur countries, with which Brazil has free trade, they would also gain an increased quota for duty-free imports from Brazil, allowing them to bring in more Golfs and Jettas.

        In much of Mercosur, though, the biggest sellers are cars smaller than Golf, so if they were to increase capacity in Brazil, it would make sense to build cars the size of Up!, Polo, Vento or Gol there. (Those cars have no market in US or Canada, though, so they wouldn’t benefit from being built in Mexico.) This could make business sense, but of course I don’t know at all whether VW’s strategy even remotely resembles this.

        But one of my assumptions here is that increased production (or increased exports?) would automatically increase the duty-free quota. Is that actually the case?

      • 0 avatar

        Correct, correct on all accounts, sir! Increased exports leads to increased quotas for importation. I think you nailed VW’s strategy. My thinking is that, in an ever increasingly competitive market that may just not be enough. Gol is fine compared to Uno or HB20 but the rest of VW’s Brazilian line? Old g5 (?) Polo against Linea, City? Fox against Cobalt, Sandero even Palio (though fine against Fiesta, Agile)? Golf against Focus, 308, heck even Bravo? Kombi??

        I think in Argentina Gol is sales leader. But with Onix, HB20, how long? Even Uno gave it a run…

        up! is the crux. Against Ka, Mille, Celta, ok, but against Uno? How much will it cannibalize Gol? There’s an article of mine on TTAC on VW’s prospects. Maybe you should take a look.

        So, to sum up, VW is producing the low rent stuff here and trying to import (at exhorbitant prices though they sell well enough) the interesting stuff. How does a Beetle at 37.5k strike you? In a land where the HB20 can fuel most buyers into thinking oh how modern, old designs like Polo, Golf are pushing people away at the heart of the market! Yes there are difficulties, but 25-30k Golfs a year at 27 to 30k USD is not enough to make local production (not counting exports)? VW is hurting its tech-leader image. Young people specially equate Fiat and VW. See them as equals. Where else in the world does that happen?

        Factory in Pernambuco, no. That would be Fiat. But they got a bunch of guv credits to expand their facilities in São Carlos (engines) and IIRC Paraná.

      • 0 avatar
        th009

        Thanks, Marcelo, and I do still remember your VW story, too.

        Clearly VW do Brasil is in transition … not only the Gol and Golf questions, but also the demise of the venerable Kombi. Will their strategy work? That’s the 1M real question, and it’ll probably take a year or two before we will know for sure, I expect.

        But in the meantime … what is the Gol G6? Is it just a facelift? Or have they actually moved Gol to a modern platform?

        I think this is the Pernambuco news that I remember reading:
        http://mobile.reuters.com/article/rbssAutoTruckMotorcycleParts/idUSN1E79P02K20111026

      • 0 avatar

        Hey thoo9!

        Sorry for the late response but maybe you’ll see this.

        The Gol g6 is a facelifted g5. No technical advancements here. Though for the Gol, the g5 and g6 are now at least in line with the rest of the market (longitudinal engine, 4 and 2 door offerings etc. In Gol’s history the g moniker is very misleading. The g5 would actually just be a g2. From g1 to g2 to g3 to g4 just redesigns. Some radical but the same car underneath. Though in the g1 phase (known as the Gol Quadrado or Square Gol there were some major changes in engine tech, the Gol started out air cooled!). BTW there is a 2 part history of the Gol witten by yours truly for TTAC.

        As to Pernambuco factory I read the link you supplied but nothing came of it. I don’t really even believe VW was serious. They were probably just pandering to the pols as pols love to take factories and jobs up to the NE of Brazil. As you know, the poorest section of the country is there and no one ever criticizes moves like that. Even the SP media feel guilty and give investments there a free pass (though they fight tooth and nail should an investment go to Rio, Minas or the South). VW got the money but they will be building the up in SP. Probably to appease the unions. They also got mega bucks for the engine plant in São Carlos, SP. So for VW all is good.

        FWIW, I don’t believe VW will ever pour money into that part of the country (see BMW building the plant in Santa Catarina in the region of Brazil with a large population of German descent). VW sees the mess Fiat is trying to work out in PE. Supposedly the plant would have been producing by the end of this year. Then they said 2014. My sources in Fiat say they don’t really expect production to start til 2015…Ford had many problems in Bahia though now things are going fine. I can’t imagine that the JACs coming out of Bahia (at least initially will be any good). The people work hard, really try, but there’s little tradition and even less infrastructure. Don’t think VW has the patience for that.

    • 0 avatar
      Magnusmaster

      I’ve heard on blogs that VW is planning to build the Golf in Brazil as well, but for some reason trade unions are opposed to the idea.

      • 0 avatar

        HeyMagnusmaster! Would you care to elaborate? I mean, I read your comments here all the time and you certainly know what you talk about, but why oh why would the unions be opposed to a new car? That could easily land VW first place in the segment again? I’m very curious…

      • 0 avatar
        Magnusmaster

        From what I’ve heard, trade unions in Brazil didn’t like that the Golf would be built in Mexico as well.

      • 0 avatar

        VW do Brasil and local trade unions met and the manufacturer said it was considering to build the Golf VII in Brazil so the plant would be upgraded, jobs would be kept and more people could even be hired.

        then the unions demanded the Brazilian plant as the sole producer of the Golf VII worldwide. yes, not even in Germany. obviously VW said it is impossible to do such thing.

      • 0 avatar

        Oh Palandi, yeah now I remember. Thanks. When I read that piece of news I thought it was so incredible I threw it out of my mind as rubbish. Are VW unions Força Sindical or CUT? The conspiracy minded could be led to believe that if FS it’s political posturing.

        Now, if the unions thought they really could do it and are not politically motivated, the only thing I can say is: Oh the stupidity!

  • avatar
    hreardon

    Outside of the enthusiast community, this is a non-story. God forbid you bring this up over at the ‘Vortex: there will be howls and gnashing of teeth.

    This move is good for a multitude of reasons, not the least of which is the ability for us in North America to get more goodies at a better price point.

    I assume this will include GTI production as well. Either way, it makes me think that at this point, US-spec Golf 7s won’t reach showrooms until the summer of 2014.

    • 0 avatar
      nezromatron

      While I’d like to think this would stem the decontenting of US-bound cars. My cynical side says it will just lead to better margins for VW.

      • 0 avatar
        hreardon

        I’ll temper that cynicism with Volkswagen’s desire to hit 800,000 units in North America by 2018.

        In order to hit that number they’re going to have to be very competitive. MQB affords Volkswagen a 20% cost reduction alone. Combine this with the manufacturing savings through production in Mexico/currency improvements (probably another 5-10% over Germany, were I to venture a guess), and you’re looking at 25-30% overall production cost reductions.

        That’s big dollars. Volkswagen has spent big dollars on MQB (estimates say $60 billion), so you can be darn sure they’re going to eek out every cost savings and volume improvement they can.

      • 0 avatar
        th009

        Margins are certain to increase. The balance between price and content remains to be seen — will VW offer a Golf 2.0 with a torsion beam axle, as on the Jetta, as a price leader? GTIs shouldn’t be significantly decontented, based on what the Jetta GLI is today.

    • 0 avatar

      I think it’s a big story for anyone who has an interest in the biz, not just cars. Now they can sell Golfs at a much lower price, like the Jetta, and push for greater volume.

      • 0 avatar
        hreardon

        Derek – If you’re referring to my comment about this being a ‘non-story’, what I really meant to say is that it’s “not a big deal” for the brand (localizing production), but that in VW enthusiast community it will be a major hand-wringing experience.

        I agree with you that from the standpoint of sales: it’s a big deal.

    • 0 avatar
      dts187

      I own a GTI but will never understand the sentiment on Vortex. Most of the population there will trash talk someone for going with non-oem tail lights but happily fit air bags or have APR flash their ECU. I can’t imagine the uproar about the Golf and GTI being made in Mexico.

      I guess I don’t see the difference. It’s not like being made in Germany has done their reliability any favors in the past.

  • avatar
    brettc

    I’ve owned 3 VWs spanning 12 model years that were made in Mexico and never really had any build quality problems relating to Mexican assembly. I don’t think it matters if Juan or Helmut assembles the car, it all comes down to part quality and VW’s engineering.

  • avatar
    tmkreutzer

    I swore off VW after my 2002 Golf TDI self destructed after less than 25K miles. Believe me, it was a slow agonizing death that happed in small steps over the years with one problem after another until one day its little German heart went kaput and left my fat ass sitting on the freeway.

    You could import that shit from the moon for all I care.

    • 0 avatar
      DeadWeight

      The ONLY reliable VWs that I know of people owning are the Rabbit (I think 2006 through present day) with the 2.5 5 cylinder and the last gen Jetta (and still current gen Jetta Sportwagen?); the verdict is out on the current Jetta is terms of reliability, I thinl.

      I know not of a single other person, whether family, friend, friend of friend, co-worker (past/present) or whomever else, that had a reliable VW other than mentioned above.

      I tried VW and gave up after suffering more problems in one year (of a 3 year misery mission) owning a 2006 Passat 2.0T than I have with my now 7 year year old Mazda (which has had exactly ZERO problems, so that is hard to beat).

  • avatar
    klossfam

    More ammo for the VW haters that only remember unreliable Mk III Golfs…but in reality, a prudent move by VW. They need the capacity and the improved costs vs Germany (when the Mk V Rabbit/Golf starting shipping in 2006, VW was actually losing about $350 each on base model 2 doors due to the German labor and production costs).

    The Mark VII has already received nothing but rave reviews and will be a big seller by the time it hits North America (the market for hatchbacks will also keep growing in the interim as the default vehicle in the US and Canada is BECOMING a small SUV/CUV OR hatchback). Depending on fuel prices as well, the Golf TDI in Mark VII guise could/should be a huge success for VW.

  • avatar
    1998redwagon

    the question is not who builds them. the question is how does it come? decontented or not? right now the cheapest tdi you can get is a jetta sedan. to the average american that makes no sense. why should a jetta which is larger cost less than that puny golf? the golf is smaller, it should be cheaper. that is what we will get. a golf that is decontented just like the jetta was in 2011 and a price point to match. sales volume of the decontented golf will increase in the us/canada with a lower price and the car will more closely resemble it compact cousins from other manufacturers.

    gti will still have improved suspension like the gli, tdi may too but my guess is that the non-gti gassers will have a rear beam axle like they do in europe.

    sigh.

  • avatar
    Pch101

    “previously, the Golf was positioned as a more upscale small car, versus the volume oriented Jetta.”

    The Golf has long been an also-ran in the US market. They used to build them in Mexico, but presumably discontinued production of them there because they couldn’t sell enough of them here to justify producing them here.

    I realize that VAG wants to spin this into something positive, but I doubt that this is strictly about pushing Golf sales volume in North America. It probably has more to do with managing production volumes and exchange rate risk, by trying to keep as much of its production regional as possible.

    There’s no reason to particularly push the Golf per se, when Americans have shown time and again that they would rather have a trunk than a hatch. That’s not to say that they won’t pursue the decontenting strategy, but all things being equal, it’s just easier to sell more Jettas. If they can build the Golf and the Jetta on the same line, then they’re interchangeable vehicles and it won’t matter which one they sell.

    • 0 avatar

      It has been an also-ran, but so was the Jetta. Also, I’m curious about how much of an impact the EU-Mexico free trade deal has on this decision. Could it be a way to ensure extra units for Europe in case the German plants can’t keep up?

      • 0 avatar
        th009

        Certainly an option. Mexican-built Jettas and Golf Wagons are already exported from Mexico to Europe.

      • 0 avatar
        Pch101

        “It has been an also-ran, but so was the Jetta.”

        For VW, the Jetta has long been its volume car for the US market. (Yes, in this case, volume is relative.) In contrast, Europeans have largely been indifferent to the Jetta, and they haven’t been built in Germany for several years now.

        This story seems to tie in to this modular architecture story that has you guys so worked up. Despite its origins as a Golf-with-a-trunk, the Jetta has become a more unique car, which presumably impacted VW’s production flexibility. If modular architecture makes it easier to build these cars on the same lines, then regional production should be facilitated by that.

        “Could it be a way to ensure extra units for Europe in case the German plants can’t keep up?”

        I don’t know for sure, but I doubt it. Again, I think that maintaining a regional orientation is the main driver for it. VW has been trying to build in North America since the 1970s — they were way ahead of the curve in that respect, even though they have done this with decidedly mixed results. Mainstream cars lend themselves to regional targeting strategies.

        (They may also be anticipating that Brazil stops violating its FTA with Mexico, although Brazil has little motivation to change its position.)

    • 0 avatar
      th009

      Golf production in Mexico ended with the Mk3 in 1999 as the Puebla plant focused on the production of the Jetta and the New Beetle.

      The next Jetta will surely use MQB as well.

      • 0 avatar
        snakebit

        I spent a short while from 2005-2009 with VW retail, and Golfs prior to the ’06 Rabbit mostly were Mexican-built for the US market. I think I noticed that the GTI came from Brazil, when I looked at the window stickers.

        I have an 06 Rabbit, and have been always surprised that even the Golf that we still get in the States is still West German. It’s good for a nice bragging points only, I could never see a difference between those and the cars coming from Mexico concerning build quality. I don’t have the ‘Vortex complex’, it doesn’t matter if they’re Brazilian, German, Mexican, or Tennessean, to me.

        I will say that VW, to some folks, has a poor quality reputation here in the States. But assuming that the build quality for European-sold VW’s is the same, it doesn’t seem to hurt sales overseas, relative to other brands. The Golf is still the best-selling passenger car in Europe, and one reason why VW is starting more Saturday shifts to meet demand in Europe for the Golf. They’re also a popular police patrol car, excluding the UK.

    • 0 avatar
      Onus

      I don’t think it has to do with how much they sell. My guess is this is a good excuse to tool up for MQB. Why not build the gold where it is cheaper if tons of other cars being produced there are on the same platform. Makes sense to me.

  • avatar
    fredtal

    Guess if you want a German built VW you will have to buy an Audi

  • avatar
    DenverMike

    How about the Golfs Mexico builds for itself? Isn’t it a big seller there? If not, it should be.

    • 0 avatar
      th009

      VW’s big sellers in Mexico are the Jetta and the Clásico (ie Jetta Mk4), which make up half the total 150K unit volume. Like their neighbours in the US, Mexican buyers do like sedans.

  • avatar
    Charlie84

    “…the Golf was positioned as a more upscale small car, versus the volume oriented Jetta.”

    If it was, it was purely incidental. Or, rather, it was due to cost reasons that the Golf was more expensive than the Mk6 Jetta. Independent rear suspension, better interior, transportation and importation costs, and comparatively expensive German labor costs ensured that the Golf would cost more in North America, despite being offered with fewer trim levels.

    If it is your perception that the Mk6 Golf was meant to be more “upscale” than the Jetta, that’s only because it was a higher quality car due to it being intended for a different market which evaluates cars a bit differently and generally pays quite a lot more for them, too.

    They didn’t bother to go as far as the Jetta in creating a cheaper version for North America because the Golf/hatchbacks don’t sell in sufficient volume here. Why would they go ahead and cannibalize the sales of their newer, more mainstream-focused, probably higher-margin Mk6 Jetta for a low-volume product that was already approaching the end of it’s lifecycle?

    By the way, this VW fanboy thinks it’s a good thing that the Mk7 will be hecho en Mexico. This might allow the Golf to finally compete on a level playing-field with the more popular Focus/Mazda/whatever hatchbacks.

  • avatar
    Dimwit

    Considering that the gas Golfs have been coming from Brazil since 2001 MY I don’t see how this changes much.

  • avatar
    thesparrow

    I think it’s funny when people brag about their new VW and confuse “german-engineered” with “made in germany”. Finding out that it’s actually made south of the border next to a pinata factory takes the wind out of those sails pretty quick!

    Skilled labor DOES MATTER when you’re talking about the single most complicated thing most people will ever purchase.

    • 0 avatar
      wmba

      Yah, shoor. A more educated chimp can use an air-wrench with pre-calibrated torque in a more sensitive, empathetic and compellingly artistic manner than a regular chimp can. Everyone knows that.

      • 0 avatar

        Wnba and thesparrow, you both oversimplify things. The main component of quality is the engineering and processes. The building though does have an influence. Cars built on Friday or Monday have more defects than those built on other days. And that’s a fact.

        As to Mexican or Brazilian workers, if anything, they’re more interested in what they’re doing and the job confers on them more prestige than any other kind of job available to them. You can be sure they try harder than most 1st world counterparts as putting together a car is one of the best, highest paying jobs they’ll be able to get.

        Take that as you will.

      • 0 avatar
        th009

        I agree with Marcelo 100% …

      • 0 avatar
        Dimwit

        Bah. That’s just ignorance. Build quality is more about process control, tooling age and QC than where it’s located. The Mexican plant is modern, huge, well run and the parts assemblies are the same guys whether it’s Germany or Timbuktoo.

  • avatar
    seth1065

    My 2011 Jetta Sportswagon TDI is made in Mexico and in 15 months and 50,000 miles no issues at all, not sure if that is because of where it is made or how it was designed and really I do not care one way or the other as long as it stays that way.

  • avatar
    dwight

    Golfs built in Mexico. I’d be interested in shopping for one if the base price came in at under $16,000. I hate that the Golf is over contented and over-priced. I’d take a solid beam axle, hard plastics, 15″ steel wheels, and the 2.0 8-valver any day. I hate the 5-cylinder 2.5 engine. Hopefully we get the 1.4 turbo or at least a base 4 cylinder model. I wish they decontented the Beetle, too. It’s too heavy.

  • avatar
    amca

    And the big reason Mexico makes sense for plant: Mexico has free trade with the EU and can export cars there without the 10% duty that gets slapped on US cars. If the US were in the same position, it would have been far more attractive to put that plant in the States.

    The US has big advantage in transport, and supplier base and security and rule of law. But a 10% duty is more than enough to cancel that out.

    And the sad thing is, the more plants get built in Mexico, the more the supplier base and the transport networks get built out, the less Mexico’s disadvantage is. Someday soon, locating in Mexico will be nearly as good a decision as the States.


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