Volkswagen's $800M Tennessee factory expansion to include battery pack plant

Volkswagen said Wednesday it will build a battery pack assembly facility as part of an $800 million expansion project that will turn the Chattanooga, Tenn. factory into its North American base for manufacturing electric vehicles.

The Chattanooga factory expansion, which includes a 564,000-square-foot addition to the body shop and is expected to create 1,000 new jobs at the plant, has been in the works for some time now. But the battery pack assembly announcement, while logical, came as a surprise.

"This is a big, big moment for this company," Scott Keogh, president and CEO of Volkswagen Group of America said in a statement. "Expanding local production sets the foundation for our sustainable growth in the U.S. Electric vehicles are the future of mobility and Volkswagen will build them for millions of people."

The automaker's Chattanooga expansion is just a piece of its broader plan to move away from diesel in the wake of the emissions cheating scandal that erupted in 2015. Globally, VW Group plans to commit almost $50 billion through 2023 toward the development and production of electric vehicles and digital services.

The Tennessee factory (along with the other new facilities) will produce electric vehicles using Volkswagen’s modular electric toolkit chassis, or MEB, introduced by the company in 2016. The MEB is a flexible modular system — really a matrix of common parts — for producing electric vehicles that VW says makes it more efficient and cost-effective.

The company also built a European facility in Zwickau, Germany. Earlier this month, VW began production of the ID. 3 electric vehicle began at the Zwickau factory. By 2022, VW's MEB vehicles will be produced at eight locations on three continents.

EV-production at facilities are expected to come online in Anting and Foshan in China in 2020, and in the German cities of Emden and Hanover by 2022.

Volkswagen currently produces the midsize Atlas SUV and the Passat sedan at the Chattanooga factory. Production of its electric vehicles is set to begin in Chattanooga in 2022. The first model will be an SUV of the ID. family.