VW to start Mexican production of small crossover bound for Canada, U.S.

PUEBLA, Mexico -- With the end of Beetle output, Volkswagen Group will begin producing the Tarek small crossover at its plant in the Mexican state of Puebla in 2020 and sales will start by the end of 2021, VW of Mexico CEO Steffen Reiche said on Wednesday.

The vehicle, discussed with U.S. dealers at the NADA convention in January and confirmed by Volkswagen Canada on Thursday, is expected to be slotted below the Tiguan crossover. 

VW Canada spokesman Thomas Tetzlaff said in an email to Automotive News Canada that Tarek “is just an internal working name only” in Canada. Scott Keogh, CEO of Volkswagen of America, told Automotive News this year that the subcompact crossover would have a different name in the U.S. market. 

On Wednesday, VW marked the end of Beetle production at the Puebla plant.

“We (along with our friends to the south) will be getting a new, smaller-than-Tiguan SUV in 2021 out of Puebla,” Tetzlaff wrote. 

Volkswagen of America said in September 2018 it planned to end output of the Beetle, closing another chapter for one of the auto industry's most storied nameplates. Demand for the venerable Beetle, like other cars, has been declining as more Canadians and Americans embrace light trucks, notably crossovers.

VW Group has also been pulling the Beetle from select global markets as part of a broader effort to streamline its bloated product lineup.

The new compact crossover will be a beefed-up version of a model sold in China named Tharu.

“We’ll adapt the Chinese model for this market,” Reiche said during an event at the Puebla plant. “Our version will be the stronger one, the rougher one compared to the Chinese one.”

Tetzlaff said “it will be unique to North America” and that final details about the vehicle “are still being worked on.”

Demand for the Beetle and other hatchbacks has been crushed by years of low gasoline prices. Trucks have been capturing record share of the U.S. market, prompting automakers including Fiat Chrysler Automobiles and Ford Motor Co. to drop many of the passenger car models from their lineups.

VW announced the plans about a month after Mexico became the first country to ratify the overhauled North American free-trade deal known as the U.S. Mexico Canada Agreement, or USMCA. The accord requires that 75 percent of vehicle content be sourced from North America to cross borders tariff-free.

The rules represent a “big challenge” for VW, whose regional content is now at 64 percent, Reiche said.

VW’s Puebla plant also builds the Jetta sedan and Tiguan SUV. Reiche said the last Beetle will be sold online through Amazon.

Reuters, Bloomberg and Greg Layson from Automotive News Canada contributed to this report.