SUV craze brings more investment to Volkswagen’s Tennessee plant

Automaker Volkswagen is planning to invest $340 million at its Chattanooga, Tennessee factory to build a smaller version of its Atlas model — a new five-seater SUV. The name of the new model, which will be the third to be produced at the Tennessee plant, is yet to be revealed.

After the Passat, which was the first model built at the plant, the carmaker invested $900 million in building the three-row SUV, Atlas, which started selling last year. A concept of the new five-passenger model will be presented at the New York International Auto Show next week, and its production is expected to start towards the end of 2019.

The new investment points to the assumption that demand for SUVs will continue going forward. Along with the increased investment, more jobs are expected to be created depending on sales volumes at the plant, in addition to the current 3,500 employees.

Over the past two months, SUVs comprised 54% of all Volkswagen brands sales in the U.S. It is estimated that there is more room for sales growth in the SUV segment. Volkswagen currently holds a 2% market share in the U.S., and it aims to increase this figure to 5%.

The Chattanooga plant could one day be the site of electric vehicle production as well. The plant is said to have excess production capacity, and it would be reasonable for the company to produce vehicles in markets that have higher sales potential to lower freight costs and avoid currency fluctuations.

These efforts are part of Volkswagen’s plan to take corrective actions after its struggle following the emissions scandal.