"Toyota to Invest $1.4 Billion to Meet Growing U.S., China Demand
New plant in Mexico to have annual production capacity of around 200,000 vehicles
ByUpdated April 15, 2015 12:40 p.m. ETYOKO KUBOTA in Tokyo AndDUDLEY ALTHAUS in Mexico CityToyota Motor Corp. unveiled its first major production expansion plan in three years, outlining a strategy that puts high priority on growth in the U.S. and takes a more measured approach in China.The Japanese auto maker on Wednesday said it plans to spend around $1 billion for a new plant in Mexico and another $440 million to add a manufacturing line to an existing facility in China.At its proposed Guanajuato, Mexico, factory, Toyota plans to produce around 200,000 Corolla compact cars a year for the North American market starting in 2019, the Japanese auto maker said. Toyota expects to complete its new Chinese line by 2017 at a plant in Guangzhou, targeting production of about 100,000 vehicles a year.Toyota, the world’s biggest auto maker, is joining the wave of auto makers building assembly plants in Mexico, which has a low-wage workforce and free-trade agreements with dozens of countries.The move underscores its intent to stay on the offensive in North America, where for the first time since 2009 Toyota is close to supplanting Ford Motor Co. as the No. 2 supplier by volume in the U.S.AdvertisementToyota forecast a record ¥2.7 trillion ($22.6 billion) operating profit for its fiscal year ended March.In China, the world’s biggest auto market, Toyota’s tack remains cautious. Even if annual production grows by 100,000 vehicles from the current 1 million vehicles, that would still be far from helping Toyota hit its ambitious goal of doubling sales and production to 2 million vehicles in the future.“In China, Toyota is a follower. We’re trying to catch up to rivals,” a person at Toyota said. “Instead of chasing [sales and production] volume, we want to focus on Toyota-like products to build our position,” the person added. “There is no way that we can compete by suddenly making huge investments to build excessive production facilities.”In 2014, Toyota’s China sales rose 12.5% to 1.03 million vehicles, and this year Toyota wants to boost that to 1.1 million vehicles. Like other Japanese auto makers, Toyota’s market share in China has slipped in recent years.Toyota, Nissan Motor Co. and Honda Motor Co. have failed to win back Chinese market share lost after the diplomatic row that broke out between China and Japan in 2012 and boycotts for Japanese products that followed.In 2014, Toyota held a 4.4% market share, lower than its 4.8% share in 2011.But some analysts say Toyota’s strategy could be sensible in light of slowing growth in China and intensifying competition over vehicle pricing.“At a time when China’s getting more complicated in pricing…having less capacity and having a higher utilization rate is actually a smart idea,” said Robin Zhu, an analyst at banker Sanford C. Bernstein. Pricing competition is increasing in the sedan segment, he said.China on Wednesday reported economic growth for the quarter ended March of 7%, its slowest rate since 2009. Growth of passenger-vehicle sales is expected to slow this year, too.German’s Volkswagen AG has been gaining on Toyota’s standing as the world’s best-selling auto maker, helped by solid China sales. In 2014, Volkswagen sold around 3.7 million vehicles there and plans to boost annual production in the country to more than 4 million vehicles by 2018.One sector where Toyota hopes to gain traction in China: gas-electric hybrid vehicles. The maker of the Prius hybrid will start selling this year locally made gas-electric versions of the Corolla and Levin, which it plans to show at the Shanghai International Automobile Industry Exhibition starting next week.Toyota follows seven Asian and European auto makers that have either recently begun production in Mexico or announced plans to produce there, since late 2013. Auto makers and their suppliers have invested more than $21 billion in Mexico in little more than two years, government officials say.U.S. auto makers have announced huge investments to expand their own Mexican plants. Ford is expected to outline $2.5 billion in investments for powertrain factories to be built in Mexico—one in Chihuahua and another in Guanajuato. General Motors Co. in December said it was investing some $5 billion in Mexico production through the next few years.A Hyundai Motor Co. executive told trade publication Automotive News this week that the Korean auto maker plans to add a plant in Mexico, joining affiliate Kia Motors Corp., which is building a factory in the northern city of Monterrey. The executive didn’t outline a timetable for a Hyundai investment.Mexico produced 3.2 million light vehicles in 2014, edging out Brazil as the world’s seventh largest automotive power. Although domestic sales have been expanding rapidly in recent months, more than 80% of Mexico’s production is exported, mostly to the U.S. market.With the arrival of the new plants and expansion of existing ones, Mexico is on course to produce 5 million vehicles a year by decade’s end, according to AMIA, the auto makers’ national association.As a result of its new Mexico plant, Toyota’s factory in Ontario, Canada, will stop making the Corolla in 2019 and start making midsize sedans. In April 2013, Toyota froze investment in new plants and instead focused on boosting productivity at existing factories. President Akio Toyoda has been vocal about how Toyota was too aggressive in building new plants in the early and mid-2000s, leaving it with excess capacity and high fixed costs after the global financial crisis. Toyota currently has around 9.8 million vehicles in annual global production capacity."
'Splain this one Mayor Nancy Barakat Vaughan. How can you justify over $20 Million in Greensboro tax dollars and an increase in water and sewer rates for a car company you knew would never come? After all, now you can't say you weren't warned?
