Toyota ends plant freeze with $1bn Mexico factory

TOKYO: The world’s biggest automaker Toyota ended its freeze on building new factories, unveiling plans for a $1.0 billion plant in rising industry power Mexico and another production line in China.
The Japanese giant said it would build a factory in the central Mexican state of Guanajuato to start production of the Corolla sedan in 2019, creating about 2,000 jobs.
The company also said it was adding another production line to an existing plant in southern China to start from 2017.
Together, the investments would raise its global capacity by 300,000 units annually — including 200,000 at the Mexican plant — at a combined cost of about $1.4 billion, Toyota said.
Toyota will shift Corolla production away from a Canadian plant to the new facility in Mexico, a favorite destination for automakers thanks to its cheap labor and proximity to the huge US market.
Mexico surpassed Brazil to become the world’s seventh biggest auto producer last year, with companies such as Japan’s Honda and US firm General Motors building up their presence in the country.
Mexican President Enrique Pena Nieto said production rose 10 percent in the first quarter compared to last year.
“Toyota’s decision to invest in Mexico is not a coincidence. This projects Mexico as a reliable investment destination,” Pena Nieto said from his official residence in Mexico City, accompanied by Toyota executives.
Toyota said it would announce later which model would roll off the new Chinese production line.
Earlier reports said the automaker would probably produce fuel-efficient passenger vehicles under a local brand through a joint venture with a Chinese firm.
The vehicles would meet stricter environmental regulations as China, the world’s biggest auto market, grapples with a serious air pollution problem.
The Japanese carmaker began operating a new Thai plant in 2013, but since then it has halted investment as the global car market has struggled with oversupply and weak demand.
Despite Wednesday’s announcement, Toyota chief Akio Toyoda said the firm would not embark on an unrestrained expansion.
“An increase in production does not mean an undisciplined pursuit of more,” he said in a statement.
Last month, Toyoda announced plans to overhaul the firm’s production methods, vowing to slash development costs and describing the shake-up as crucial to navigating “sudden and drastic changes” in the auto sector.
While the car giant is on track for a record $18 billion fiscal year profit, largely due to a weak yen and strong North American sales, Toyoda has said his family firm must go further to protect its bottom line in a fast-changing market.
The company said it would raise the fuel efficiency of its powertrains — the engine and transmission — and build more new models on common platforms, as its rivals also increase the number of shared parts on different vehicle models.
Toyota said the move, aimed at cutting development costs by 20 percent, would start with mid-sized, front-wheel-drive vehicles this year. It wants half of vehicles it sells globally by 2020 to fall under the new platform strategy.
The new investments would highlight that strategic move, the firm said.
“Building this plant (in Mexico) will be one of Toyota’s efforts to realign its North American manufacturing operations and begin a new approach to plant building,” it added.
Toyota kept its title as the world’s biggest automaker last year as it announced record sales of 10.23 million vehicles, outpacing GM and Volkswagen.