The factory, which represents an investment of $550m, will produce TSI engines for supply to VW’s North American vehicle plants in Puebla, Mexico and Chattanooga, USA, and will have a mid-term annual capacity of 330,000 units.

VW said that strengthening its market position in North America is an essential part of the group’s global growth.

Dr Martin Winterkorn, chairman of the Board of Management of Volkswagen Aktiengesellschaft, commented: ‘Over the next three years the Volkswagen Group will be investing more than $5bn in North America alone. Silao is thus also a strong symbol of our uninterrupted growth trajectory and the group’s continuing internationalisation.’

Volkswagen has been present in the Mexican market for nearly 60 years and as well as the Volkswagen plant in Puebla also runs the MAN commercial vehicles plant in Querétaro. An Audi vehicle plant will also begin production in San José Chiapa in 2016.

Andreas Hinrichs, CEO of Volkswagen de México, said the group produced 600,000 vehicles in Mexico last year.

‘For us, Silao is a big step towards the future. Volkswagen is once again generating strong momentum for growth and employment in the Mexican automotive industry,’ he said.

The Volkswagen Group delivered 165,900 vehicles to customers in Mexico in 2012, up by 8.2% from the figure of 153,300 for 2011.