Japanese automakers Toyota (NYSE:TM) and Mazda announced on Friday a plan to build a $1.6 billion factory in the U.S., creating up to 4,000 new jobs.
Continue Reading Below
The new plant, which would open for business in 2021, will make Toyota Corolla small sedans and a future Mazda crossover vehicle destined for North American markets. The companies say the plant will have the capacity to build 300,000 vehicles per year.
Toyota also said it will purchase a 5.05% stake in Mazda, a stake valued around $455 million. Mazda will buy a 0.25% stake in Toyota.
President Donald Trump has criticized Toyota, General Motors (NYSE:GM) and Ford (NYSE:F) for building vehicles in Mexico and shipping them to the U.S. Toyota originally intended on building Corollas at a plant currently under construction in Guanajuato, Mexico, but it changed its plans after evaluating current demand for small cars. The company now expects to build Tacoma pickup trucks at the Mexican factory.
Toyota President Akio Toyoda said Trump’s views did not influence the automaker’s decision to build a new plant in the U.S.
Trump welcomed the announcement in a tweet: "Toyota & Mazda to build a new $1.6B plant here in the U.S.A. and create 4K new American jobs. A great investment in American manufacturing!"
Toyota wouldn't say where the plant would be built. But because the new plant will build the Corolla, chances are it will be located near Toyota's current Corolla plant in Mississippi to be close to parts supply companies.
Sales of small cars have slumped in the U.S. amid steadily low gas prices. Corolla sales fell 10% through July. But Toyota hopes the market will have shifted by 2021. If not, the plant will have the flexibility to shift to another model, according to spokesman Scott Vazin.
The U.S. factory is part of a broader joint venture that calls for Toyota and Mazda to collaborate on new technologies, including electric vehicles, connected cars and advanced safety features. The companies also said they will create more products that they can both use.
In the past, Toyota was not overly bullish on electric vehicles, which have a limited cruise range. But recent breakthroughs in batteries allow for longer travel per charge. Japanese rival Nissan Motor Co. is allied with Renault SA of France and Mitsubishi Motors Corp., and is the global leader in electric vehicles. Their alliance led world vehicles sales for the first time in the first half of this year.
Toyoda also noted the growing competition from newcomers in the auto industry like Google, Apple and Amazon, stressing he was worried about autos turning into commodities. He praised Mazda as a great partner in that effort.
Friday's announcement builds on an existing partnership. Toyota, which makes the Prius hybrid, Camry sedan and Lexus luxury models, already provides hybrid technology to Mazda, which makes compact cars for Toyota at its Mexico plant.
The sheer cost of the plant also makes a partnership logical, as it boosts cost-efficiency and economies of scale. Working together on green and other auto technology also makes sense as the segment becomes increasingly competitive due to concerns about global warming, the environment and safety.
"Given the massive level of competition in the industry, partnerships are no longer a surprise," said Akshay Anand, an executive analyst at Kelley Blue Book.
Politics are another incentive.
"The new presidential administration has made it clear investments in the U.S. are a top priority, and this plant may be another nod to that mindset," Anand said.
Mazda, based in Hiroshima, Japan, used to have a powerful partner in Dearborn-based Ford, which bought 25% of Mazda in 1979, and raised it to 33.4% in 1996. But Ford began cutting ties in 2008, and has shed its stake in Mazda.
Also Friday, Toyota reported its April-June profit was 613.0 billion yen ($5.6 billion), up 11% from 552.4 billion yen a year earlier. Quarterly sales rose 7% to 7.05 trillion yen ($64 billion), as vehicle sales improved around the world, including in the U.S., Europe and Japan.
Toyota stuck to its earlier projection for global vehicle sales for the fiscal year, ending in March 2018, at 10.25 million vehicles.
The Associated Press contributed to this report.