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VW Pours $340 Million Into U.S. Factory in Bid to Meet American SUV Demand

Volkswagen plans to invest $340 million to build a new five-passenger sport utility vehicle based off its bigger Atlas model at its factory in Chattanooga, Tenn., a bet that American demand for crossovers and SUVs will continue.

Volkswagen invested $900 million to expand the plant to produce the Atlas, a three-row SUV that went on sale in 2017. The new, smaller variant to the Atlas will be the third Volkswagen model assembled at the Chattanooga factory. The Passat was the first vehicle built at the plant.

“During my time as governor, I’ve watched Volkswagen Chattanooga flourish from a single vehicle producer, starting with the Passat, into what it is today—a thriving U.S. manufacturing operation that can produce three models, and counting,” said Governor Bill Haslam.

A concept of the new five-passenger SUV will be unveiled at the 2018 New York International Auto Show, which kicks off March 30. The vehicle is based off its MQB platform, an architecture that can accommodate a variety of engine options, including hybrid and plug-in hybrid models. The Chattanooga factory has been viewed as the likely location for VW’s plan to produce electric vehicles, which was prompted by the diesel emissions scandal in 2015.

The new vehicle is part of VW’s long-stated goal to capture 5% of the U.S. market share, a strategy that has caused the automaker to shift from smaller sedans to larger vehicles like crossovers and SUVs. The brand almost has 2% market share in the U.S.