NAGOYA, Japan — Toyota Motor will scale back a project to build a new auto plant in Mexico, reducing investment by 30% and slashing output capacity by 50% from the original plan, as part of a North American realignment to increase U.S. production.
The Japanese automaker initially said it would invest $1 billion to start making 200,000 units of the popular Corolla sedan yearly in the state of Guanajuato in 2019. But the plant instead will build Tacoma pickup trucks, whose sales are increasing, helped by cheap gasoline. Investment will now be reduced to $700 million, with annual volume slashed to 100,000 units.
The Corolla production will shift to a U.S. plant to be built with Mazda Motor, Toyota said in August. The facility, capable of churning out 300,000 vehicles a year, is slated to start operating in 2021.
Toyota will concentrate its North American production of the Corolla in the U.S. to raise efficiency. The Mexico plant will be able to produce the Tacoma earlier than an alternative site. Toyota expects the early start will help boost Tacoma sales.
Donald Trump, as U.S. president-elect, tweeted “no way” in January to Toyota’s original plan for the new Mexico plant, demanding that the automaker jettison the project. Toyota has devised various proposals to appease the “America First” president.
Soon after the tweet, Toyota announced $10 billion in investments over five years to renovate American plants. The automaker later unveiled a $1.33 billion investment in a vehicle assembly plant in the U.S. state of Kentucky. The company last month said it will begin making core components of hybrids in West Virginia in 2020.
In 1988, Toyota opened its first U.S. plant in Kentucky. The company followed in 2011 with its fourth American factory, in Mississippi. As the automaker expanded U.S. operations, group suppliers increased local production as well. Toyota’s 2.84 million unit sales in North America made up roughly 30% of its global total in fiscal 2016.
Toyota lately has bolstered collaboration with other companies. In addition to an earlier announced tie-up with Subaru, Toyota has formed a capital partnership with Mazda to develop electric vehicle technologies and build the U.S. plant. The two companies held matching interests, as Toyota seeks to strengthen its American operations and Mazda has no factory in the U.S.
U.S. auto sales declined in the January-June half, and uncertainty over the North American Free Trade Agreement amid the Trump administration’s efforts to renegotiate the pact also raises concern. Toyota’s ability to maintain competitiveness depends in part on determining how to allocate investment and production across its eight vehicle assembly plants in the U.S., Canada and Mexico.