Since May 2015, Toyota and Mazda have been quietly working together searching for ways to harness each other’s strengths.

Now, the two Japanese automakers have stepped out from the shadows to announce the first project of this alliance. The five-part plan includes:

  • Producing vehicles in the U.S.
  • Developing electric vehicles.
  • Developing technology for connected cars.
  • Improving vehicle safety technologies.
  • Providing complrmentary products.

Parts two through five are in their infancy and will provide new products for Mazda and Toyota well into the next decade. But the highlight of last week’s announcement was the joint venture to produce vehicles.

Specifics remain light, but the two companies plan to have 50/50 ownership of the new plant. Opening in 2021, the unnamed plant will include investment of $1.6 billion, create up to 4,000 jobs and have a capacity of about 300,000 units. Products will include CUVs for Mazda and the Toyota Corolla.

Market conditions and expectations around a first-term U.S. president have changed the plans of many companies, and that includes both Toyota and Mazda. Two years ago, Toyota announced the next-generation Corolla would enter production in a new Guanjuato, Mexico, plant starting in 2019 (replacing the currently Canadian-built model in favor of the more popular RAV4). However, the risks of an import tax could have persuaded the company to rethink those plans. And Mazda, a midsized volume player in North America, needs to shore up its North American production footing, where U.S. capacity couldn’t hurt.

In moving the Toyota Corolla from Mexico to the U.S., Toyota says it will build the Tacoma pickup in Guanjuato. Currently, the U.S. inventory of the Tacoma is below the industry’s average (48 days vs 68 days) and this does not necessarily require a whole new plant. With two plants (San Antonio and Tijuana) already producing the pickup, this third facility would require more product to reach maximum capacity utilization. AutoForecast Solutions believes Toyota can relocate the popular and imported 4Runner production, which shares the Tacoma’s body-on-frame platform, to Guanajuato.

On the other side of the joint venture, Mazda’s most popular model in the U.S. is the CX-5 CUV. With sales just shy of 10,000/month, the import-only CX-5 is the prime candidate for a North American plant. Building that model in North America makes sense. The CX-5 outsells each of the other two Mazda CUVs, the smaller CX-3 and the 7-passenger CX-9, by about a 5-to-1 ratio.

As for where the plant will be located, the companies have not announced those details. Toyota’s supplier base is a key deciding factor for the location, since Mazda does not have a supplier base outside of Salamanca (Mexico). Currently, Corollas are produced in Blue Springs, MS, and get their engines from Buffalo, WV. Because of this, the corridor between these plants is the most logical destination for the facility.

When looking at the existing Toyota manufacturing footprint in the U.S., the Blue Springs location is a prime candidate for the new plant, for four key reasons:

  • Toyota already has open land at the facility large enough for a plant this size.
  • The location allows Toyota to supply 300,000 Corollas between the two plants, utilizing the same supplier base.
  • When Blue Springs opened (in 2010), 41,000 people applied for the plant’s 2,000 jobs; local unemployment and household income lag behind the national averages.
  • Blue Springs is close enough to waterways and interstates to supply the imported parts necessary for the Toyota and Mazda models, key because Mazda does not have a North American engine plant.

The 2021 timeframe given for the plant’s opening fits in well with Toyota and Mazda product cycles. The current-generation Mazda CX-5 started production in late 2016, making 2021 perfect timing for the next-generation model to begin. That would be midcycle for the next-generation Corolla, which is migrating to the TNGA global architecture for 2019, meaning production easily could shift to other TNGA products as market conditions change.

Those market conditions, along with the changing attitude of the Trump Admin., can affect corporate plans going forward. Toyota and Mazda are looking at how to best compete in the 21st century with the expanded role of electric and autonomous vehicles coming in the next decade or two. Working together allows the companies to remain competitive (Mazda) and provide more engaging products (Toyota).

Sam Fiorani is vice president-global vehicle forecasting for AutoForecast Solutions.