Volkswagen may build another electric SUV in North America, reports Germany's Handelsblatt.

The proposed EV would slot in beneath the ID.4, an electric crossover built at the automaker's Chattanooga plant in Tennessee. The smaller model will either be made at the facility mentioned above or at Volkswagen's Puebla-based factory in Mexico.

A spokesperson confirmed the plans but divulged no further details on the matter. In December, VW's Thomas Schafer hinted at the arrival of a new electric SUV in 2026. "We are working to bring a further electric model based on the MEB+ to Wolfsburg - this will be a high-volume model for the booming SUV segment," the VW executive said at the time.

It would make sense for VW to build its more affordable SUV in the United States or North America. If priced correctly, the ID.3 SUV - as it's rumored to be called - would bring a budget-friendly electric vehicle to market and encourage even more buyers to purchase an EV. Coupled with the new $7,500 tax credit, the baby electric SUV could prove hugely successful for the marque.

While Mexico is still on the table, more evidence suggests Chattanooga will be chosen. According to the German publication, Volkswagen is looking to establish a battery cell plant in Ontario, Canada. Documents seen by Handelsblatt show the automaker is investigating a possible production site. Province officials have said they want to support the project and will try to remain competitive with other potential locations.

VW remains tight-lipped on the matter, but a spokesperson said the automotive giant is currently evaluating suitable locations for a first gigafactory in North America but that "no decisions have been made."

Pierre Fitzgibbon, Economics Minister for the province of Quebec, said Volkswagen had approached the province but, unfortunately, couldn't come to an agreement. "We couldn't offer them what they needed for their battery factory in time."

Canada is a very appealing country for car companies looking to establish a battery facility. The nation is rich in raw materials required in battery production, such as nickel and cobalt. "Because of its raw material deposits, the expertise in cathode and anode production, and last but not least because of its experience in recycling, Canada is definitely one of the shortlisted favorites when choosing a location," Christian Konig explained to the publication.

Should the automaker establish a battery facility in Canada, it would make more sense to build the baby SUV in the USA with regard to logistics and transport. Canada also has a free-trade agreement with the USA, so the Inflation Reduction Act would apply.

Getting back to the smaller Volkswagen electric SUV, we expect it to borrow design cues from the ID.3 facelift (previewed above and below). The ID.3 SUV could serve as the battery-powered version of the Taos, a smaller and more attainable crossover that slots beneath the Tiguan.

This is just one of many new EVs that Volkswagen plans to introduce. The ID.Buzz will cater to large families with an eco-conscious lifestyle, while the sophisticated ID.7 sedan will tackle the Tesla Model 3 in the electric sedan race. A patent filing also suggests a battery-powered pickup truck will arrive in the coming years as a rival to the upcoming Ford Ranger and Maverick Lightning models.