(CNN) -- Volkswagen is investing $800 million in its plant in Chattanooga, Tennessee, a move that will add 1,000 jobs to the factory, the company announced Monday. It plans to build electric cars there.
Volkswagen's investment in Tennessee comes weeks after General Motors announced plans to close three North American plants and shift its production focus away from sedans, to free up money to develop to electric and self-driving vehicles.
The move also comes amid talks between Volkswagen and Ford about pooling resources to make the next generation of vehicles.
The new Tennessee jobs and production should begin in 2022, according to the company's statement.
"The US is one of the most important locations for us and producing electric cars in Chattanooga is a key part of our growth strategy in North America," said VW CEO Herbert Diess.
Volkswagen is among the world's largest automakers. The company reported record sales of 10.8 million vehicles last year. But only about 1% of those sales were electric cars.
Volkswagen and other leading automakers are scrambling to boost production of electric and self-driving cars, which they believe are the future of the industry.
Late last year Diess announced what he called an "electric offensive" in terms of future development and production plans. He said the company would invest €44 billion ($50 billion) by 2023 to develop electric cars, self-driving vehicles and other new technology.
Despite its success in much of the world, Volkswagen still has only a thin slice of the US car market, the second largest vehicle market after China. Unlike some of its Asian competitors which have multiple US plants, Volkswagen's Chattanooga plant is its only US factory.
The plant, which opened in 2011, has about 3,500 employees. The plant currently builds the midsize Atlas SUV and the Passat sedan, and it is looking to add the a five-seat version of the Atlas later this year.
After a meeting at the White House with President Donald Trump in December, Diess told reporters that VW might be willing to build some of its vehicles at Ford's US factories in the future, assuming an agreement on an alliance could be reached.