New Volkswagen Passats are seen behind the Chattanooga assembly plant's building front.

Volkswagen will probably build a new sport utility vehicle in Chattanooga, two people familiar with the matter told Bloomberg.

Chattanooga is the favored location over the automaker's plant in Puebla, Mexico, said the people, who asked not to be identified.

Late last year, a VW official called Chattanooga the the leading contender in the competition to produce the vehicle.

Marc Trahan, Volkswagen of America's executive vice president of quality, said at a Michigan auto conference then that the Chattanooga plant is the front-runner to produce the SUV, which was unveiled as a concept of at the 2013 Detroit auto show.

Trahan said the company believes it needs the full-size SUV in the U.S. market. However, it would likely be 2016 before such a vehicle could hit the market.