A New Toyota/Mazda Plant? Trump Has These Two Running Scared

Today’s announcement Toyota and Mazda will establish a new joint-venture plant in the U.S. has Donald Trump written all over it.

Why? Because neither need another 150,000 units of anything, especially in light of forecasts showing we are in the beginning stages of a protracted new-vehicle sales decline.

Even optimistic forecasts, including WardsAuto's, call for no growth in the U.S. seasonally adjusted annual rate going into the next decade. A pessimistic report by Bank of America Merrill Lynch forecasts the U.S. SAAR will plunge by 2021 to 13 million, from roughly 17 million this year. Incidentally, that’s the same year this new plant is set to open.

President Trump’s bluster that he will slap a border tax on vehicles imported to the U.S., to encourage local manufacturing, has died down, thanks to influential Republicans, namely the auto-dealer contingent, which has vociferously complained, and accurately pointed out, a border tax would only serve to skyrocket vehicle prices across the board given the back-and-forth movement of parts across the U.S./Mexico border.

While Trump supported a border tax, Congress announced last week it was not pursuing one. Toyota U.S. sales chief Bob Carter even expressed relief earlier this week about the matter being dropped. Still, that message apparently didn’t make it to nervous Toyota executives in Japan, who this morning announced they are aligning with Mazda to open a new $1.6 billion vehicle-assembly plant somewhere in the U.S. by 2021, with annual capacity of 300,000 units.

Toyota is saying its half of the 300,000 will be used for Corolla production.

Toyota was to make the Corolla at a new, 200,000-unit assembly plant in Guanajuato, Mexico. Today’s announcement clearly is politically motivated.

Toyota says it will add Tacoma production to Guanajuato to fill the void left by the Corolla.

But looking at inventory data, and given the fact Toyota is expanding its Tijuana, Mexico, plant to build 60,000 more Tacomas annually – and Toyota already has a second production source for Tacoma at its San Antonio plant – it doesn’t make sense to add more inventory of that pickup. Toyota especially doesn’t need another 200,000 Tacomas, the annual output at Guanajuato. For the record, Toyota right now is saying it will maintain its $1 billion investment in Guanajuato.

Could it stop building Tacoma in Tijuana and build something else there? Possibly. But what? Small cars? Mazda already is building the Yaris for Toyota at its Salamanca, Mexico, plant. And Yaris sales in the U.S. and Mexico are down this year.

The C-HR? Toyota’s new subcompact CUV is doing well, with 8,942 sold in the U.S. through July, but not exactly tearing up the sales charts. Honda’s rival HR-V tallied 9,779 in July alone.

And the C-HR’s production source, Toyota’s Sakarya, Turkey, plant, has a hefty 280,000-unit annual capacity.

For Mazda, which has had no U.S. manufacturing presence since 2012 when it stopped building Mazda6s in Flat Rock, MI, with former stake owner Ford, a new U.S production site on the surface makes sense…only if you consider Trump.

That’s because Mazda has had no problem filling its relatively meager U.S. demand with its existing Japanese capacity, and because it already has its plant in Salamanca – shipping subcompacts to the U.S., including Toyota’s Yaris iA – that likely could satisfy any increase in U.S. demand for CUVs, which is what Mazda says it will build at the new U.S. JV plant with Toyota.

Mazda reportedly will build a new CUV at this U.S. JV plant with Toyota. There are reports of a CX-8 due in Japan, a smaller version of the CX-9 and with three rows.

But large CUVs are down 11.1% this year as a group in the U.S. Most CUV sales growth is occurring in the B- and C-segment 2-row models, and analysts see those groups continuing to be the most robust.

Could Mazda puts some of its other CUVs at this new JV plant with Toyota?

WardsAuto estimates Mazda had a 52-day supply of the small CX-3, midsize CX-5 and large CX-9 in late July. That's slim, but not that far off from the light-truck industry average days' supply of 68.

And if Mazda needs more CX-3s, why not build them in Mexico, where the CUV’s platform mate, the subcompact Mazda2, already is assembled for sale in the country. Fear of border taxes?

The other major news from this morning’s announcement is the two Japanese automakers will collaborate on EVs.

But the near- and mid-term outlook for EVs is mild to flat, especially given the uncertainty surrounding U.S. fuel-economy requirements going forward.

Automotive engineers, in a recent WardsAuto-sponsored survey, say they expect CAFE rules, propelling automaker interest in EVs, to ease given the Trump Admin.’s pro-business, anti-environment stance.

And while I’m a proponent of EVs, the sad fact is just 53,218 EVs have been sold all year in the U.S., WardsAuto data shows. For perspective, Toyota sold 41,804 units of just one model, the RAV4 CUV, in July in the U.S.

On the topic of EVs, does Toyota think its EVs will be as hot as Tesla’s, with years-long waiting lists? Doubtful. They won’t have the aura of Elon.

Doubtful too is Mazda’s allure for EV intenders. The brand has no track record with EVs, or hybrids for that matter.

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