MEXICO CITY -- Toyota Motor will build vehicle assembly plants in Mexico and China, shifting back to production expansion from a streamlining strategy implemented in the wake of the financial crisis.
The Japanese automaker announced the move Wednesday, with the total investment estimated at about 170 billion yen ($1.4 billion).
Toyota had frozen construction of new vehicle plants in 2013, focusing instead on raising productivity at existing facilities. But with the reforms having run their course, construction of new facilities will resume. The two plants are seen adding a combined 300,000 units a year to Toyota's production capacity.
The Mexico plant will be built in the central Mexico state of Guanajuato. It will make the Corolla sedan starting in 2019 for export to the U.S. and other markets. Annual output capacity will be 200,000 units.
Currently, Toyota builds the Corolla in Canada and the southern U.S. state of Mississippi. It plans to consolidate the model's production in Mississippi and Mexico, where labor costs are cheaper. The proximity of the plants would also lead to more efficient parts distribution. Freed-up capacity at the Canadian facility will be used to make more sport utility vehicles.
In China, the company will set up an assembly plant via local joint venture GAC Toyota. The facility will be completed at the end of 2017 and will make 100,000 compacts a year, raising Toyota's Chinese annual output capacity by 10% or so to 1.1 million.
The demand plunge following the 2008 Lehman shock dealt a major blow to Toyota, which then worked to develop low-cost production lines less vulnerable to demand fluctuations. Now those efforts are bearing fruit. The initial investment for the Mexican and Chinese plants are estimated at 40% or so less than what they would have cost in 2008.