Volkswagen Group of America will invest approximately US$900m (€643m) in the project, with about US$600m (€432m) to be invested in Tennessee.

Prof Dr Martin Winterkorn, chairman of the Board of Management of Volkswagen Aktiengesellschaft, said: ‘The United States of America is and will remain one of the most important markets for Volkswagen. Over the past few years, we have achieved a lot there. We are now launching the second phase of the Volkswagen campaign in the US. With the midsize SUV, the expansion of the Chattanooga plant and the new development centre, the focus is on the wishes of the US customer. This is also a strong signal for the US as an industrial and automobile production location. The Volkswagen brand is going on the attack again in America.’

The new SUV will be the second model to be produced in Chattanooga, in addition to the US-built Passat, with production due to start from the end of 2016.

Apart from investing in the production of a new vehicle, the Chattanooga location is to receive a new, independent National Research & Development and Planning Center of the Volkswagen Group of America for project coordination in the North American market. The objective is to identify customers' feedback in the market and to integrate them more expeditiously into existing and planned vehicle models. This will lead to the creation of approximately 200 qualified engineers working in Chattanooga.

The midsize SUV, which is based on the CrossBlue concept vehicle shown at the 2013 Detroit Motor Show, was developed especially for the North American market. The model will be offered a seven-seat arrangement featuring a three-seat bench in the middle and will use the MQB platform.