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Volkswagen Plans to Invest $340M for SUV Production in US

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Volkswagen AG is planning to invest $340 million (£242 million) to upgrade its Chattanooga, TN facility. The amount will be used to manufacture a new sports utility vehicle (SUV), per Reuters. This decision was taken by the company after a surge in demand for large vehicles was observed.

The new five-passenger SUV will be added to the company’s Atlas family. Earlier in 2017, Volkswagen started selling its seven-passenger Atlas model and launched its all-new 2018 Tiguan SUV. A concept version of the new SUV will be launched next week at the New York International Auto Show.

In 2011, Volkswagen’s Chattanooga assembly plant started its stint with the production of Passat, a mid-sized sedan. Currently, a flourishing U.S. manufacturing plant produces three different vehicle models.

Volkswagen AG Price and Consensus

This recent development will aid the U.S. auto industry that recently faced a bump as the government decided to raise steel and aluminum tariffs on the usage of metal produced outside of North America. Per Tennessee Governor, the hike in tariff can lead to soaring raw material costs, resulting in low margins for auto manufacturers.

Price Performance

Over a year, shares of Volkswagen outperformed the industry it belongs to. During the period, the company’s stock gained 34.6% in comparison with the industry’s rise of 11.7%.

Zacks Rank & Other Key Picks

Volkswagen holds a Zacks Rank #2 (Buy). Other top-ranked stocks in the auto space are LKQ Corporation (LKQ - Free Report) , AB Volvo (VLVLY - Free Report) and Toyota Motor Corporation (TM - Free Report) . LKQ Corp and Volvo carry a Zacks Rank of 2, while Toyota sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LKQ Corp has an expected long-term growth rate of 14%. Over a year, shares of the company gained 32.3%.

Volvo has an expected long-term growth rate of 15%. Shares of the company gained 29.6% in a year.

Toyota has an expected long-term growth rate of 6.1%. Over a year, shares of the company gained 14.8%.

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