Toyota to establish joint assembly plant with rival Mazda

WASHINGTON — Toyota Motor and rival Mazda Motor are expected to announce plans on Friday to build a $1.6 billion assembly plant in the United States as part of a new joint venture, a person briefed on the matter said.

The plant will be capable of producing 300,000 vehicles a year, with production divided between the two automakers, and will employ about 4,000 people when it opens in 2021, the person said.

A new auto plant would be a major boost to US President Donald Trump, who campaigned on promises to increase manufacturing and expand employment for US autoworkers.

The source, who requested anonymity, said the plant in a yet-to-be-determined US location was expected to build Toyota Corolla cars and a Mazda crossover utility vehicle.

Japan's Nikkei reported earlier on Thursday that Toyota would take a roughly 5 percent stake in Mazda Motor to develop key electric vehicle technologies and build a factory in the US.

The source confirmed the Japanese carmakers planned future joint efforts on electric vehicles.

Toyota said the two companies have been exploring various areas of collaboration under a May 2015 agreement, and added that the group intended to submit a proposal to its board on Friday regarding Mazda. It did not comment further.

"The industry pace of electrification has really picked up," Toyota Chairman Takeshi Uchiyamada－widely known as the father of the Prius hybrid－said at an event outside Tokyo, declining to comment on the US plant or a Mazda deal.

He defended Toyota against concerns the company has fallen behind its competition on electric cars, citing new technology.

Mazda said in a statement that "nothing has been decided yet" and added the company would have a board meeting. It did not comment further.

"Mazda needs electrification technology. In the past they've poo-pooed EVs, they've felt that they can make internal combustion engines more efficient, but the bottom line is that globally you need to have this technology," said Janet Lewis, head of Asia transportation research at Macquarie Securities.

With a research and development budget of around 140 billion yen ($1.27 billion) this year－a fraction of Toyota's 1 trillion yen－Mazda has said that it lacks the funds to develop electric cars on its own. Subaru, Japan's smallest major automaker, also has a partnership with Toyota.

Production boost

Toyota, the world's second-largest automaker by vehicle sales in 2016 and Japan's dominant car company, has been forging alliances with smaller Japanese rivals for several years, effectively consolidating the Japanese auto sector.

A new US assembly plant would likely become the prize in a fierce competition among Midwestern and Southern states eager to expand manufacturing jobs.

The plan comes as demand for cars has fallen sharply. Toyota's Corolla sales in the US are down nearly 9 percent this year.

In North America, Toyota builds Corolla cars in Canada and Mississippi, and announced plans in 2015 to shift Canadian Corolla production to a new $1 billion plant in Mexico.

Mazda, whose annual global vehicle sales are one-eighth of Toyota, currently exports vehicles from Japan and Mexico to supply the US market, where it generates roughly one-third of its global vehicle sales.

It caters to a niche audience in North America with its design-conscious sedans and SUVs, and has been focusing on developing more fuel-efficient gasoline engines.

Trump in January criticized Toyota for importing cars to the US from Mexico.

The Republican president also threatened to impose a hefty fee on Toyota if it were to build Corolla cars for the US market at a plant in Mexico. But since January, Trump has praised Toyota for its US investments.

Toyota said in January it planned to invest $10 billion in the US over the next five years to meet demand. Last month, Trump complimented Toyota for completing its long-planned new North American headquarters in Texas.

Reuters