Following the emissions scandal, Michael Horn, CEO Volkswagen Group of America, said the carmaker was making a "clear commitment to Chattanooga location" and added that: “The United States of America is still one of Volkswagen's most important markets.”

The move will see total investment of $900m, with production of the new midsize SUV in Chattanooga scheduled to commence at the end of 2016.

"This clear commitment to the Chattanooga location confirms our engagement in North America and our confidence in the local team. More than ever, we must and will focus on the specific wishes of our U.S. customers so that we can offer them vehicles that are not only convincing, but also inspirational. Step by step, that is how we want to win back trust in the Volkswagen brand," said Michael Horn.

Volkswagen is also planning a three-row version of the new Tiguan for the US market, with the new model scheduled to start leaving the assembly line at the plant in Puebla/Mexico in 2017.