Audi says it will build an SUV at a new plant in Mexico beginning in 2016.

The exact location of the facility, its first in North America, will be determined later this year. Audi has not revealed the plant’s initial capacity.

“As an established car-making location, Mexico offers an excellent economic basis for Audi production operations,” Audi Chairman Rupert Stadler says in a statement.

“Good infrastructure, competitive cost structures and existing free-trade agreements played a significant role in the choice of Mexico. This trailblazing move will help us safeguard our position on the world market.”

Audi had considered adding capacity at parent Volkswagen’s Chattanooga, TN, facility, but suppliers told WardsAuto in November that the German auto maker had decided on Mexico as the location of its new assembly plant. U.S. executives confirmed in January that Chattanooga had been removed from the selection list.

In an interview at the Detroit auto show, Audi of America President Johan de Nysschen said Mexico’s free-trade pacts with Europe and Brazil offered a big advantage over a U.S. factory site, because the auto maker would be able to build cars for markets beyond North America, maximizing efficiency.

“We’ve got to build our business to get to the point where, with a combination of production for the U.S. and some exports to other markets, we can get the economies of scale to make that factory work,” de Nysschen told WardsAuto.