Toyota is said to be scouting locations for a new plant in Mexico, according to a Bloomberg News report. The company is said to be reviewing several Mexican states and have met with Mexican federal officials for preliminary talks on the potential new plant, sources “with direct knowledge of the matter” told Bloomberg. The size and timing for this possible production capacity increase has not been determined. A Toyota spokesperson said, in an email to the news outlet, “We are always evaluating opportunities in North America in line with market demand, but no decisions have been made.” Toyota currently operates a CKD plant in Tijuana, which has capacity of 63,000 units per annum (upa) of the Tacoma. Additionally, Mazda will begin building a subcompact for Toyota in 2016, at a rate of about 50,000 upa.
Significance: Toyota is one of the few major automakers without an assembly facility in Mexico, with Kia the most recent to announce investment into the country. A lower cost of labor, transportation infrastructure and 45 free-trade agreements make Mexico particularly attractive in today’s market. Toyota Motor production has grown from 5.36 million units in 2000 to a forecasted 8.16 million in 2020, including the potential Mexican capacity. IHS forecasts Toyota will add production in Mexico by 2018, reaching 131,000 units in 2020. We forecast B and C segment cars at the new plant, following the trend for additive Mexico production capacity planned for compact and subcompact vehicle production—lower labor costs and access to many markets where these are the most popular size class makes producing them in Mexico more attractive than in the US. We forecasts production of C segment vehicles in Mexico will increase from 49.4% of the country’s output to 51.3% in 2020. Production of B-segment vehicles is taking a larger gain--from 10.8% in 2011 to 20.0% in 2020--as a result of the new production capacity. D segment share of production drops from 37.4% in 2011 to 27.8% in 2020-- production volume grows at a slower pace than the other size classes.
