Toyota's Truck Production Plans Largely Dependent on NAFTA Existing
Despite President Trump giving Toyota significant praise for its continued investment in the United States last week, the success of the automaker’s production plans hinge on the continuation of NAFTA — something the Commander in Chief has been vehemently opposed to since his well-before his inauguration.
Toyota and Mazda’s $1.6 billion factory is anticipated to yield 150,000 Corollas annually and free-up assembly facilities in Mexico that would build the Tacoma pickup. However, if the North American Free Trade Agreement is dissolved, anything produced south-of-the-boarder could be subjected to the chicken tax. Were that to happen, Toyota would be placed into quite a predicament and faced with high import taxes on any trucks it had hoped to ship to the U.S.
Toyota is currently expanding Tacoma production in Tijuana, Mexico. By 2019, the automaker’s pickup manufacturing in Mexico will have risen to around 260,000 units per year — representing an almost billion-dollar investment between two plants. If NAFTA dissolves, every single one of those vehicles shipped north could be hit with a 25-percent import fee.
“That is a risky strategy,” Duncan Wood, Director of the Washington-based Mexico Institute, told Automotive News. “I think there is a very real probability that the NAFTA talks will fail … There’s a great deal of pessimism at the moment here in Washington.”
Toyota North America’s CEO, Jim Lentz, is less concerned — suggesting that the chicken tax would be so detrimental to North American production efforts that the U.S. would probably go forward with implementing it in Mexico. But other companies aren’t so confident. Fiat Chrysler Automobiles said it would definitely move Ram production from Mexico to Michigan if NAFTA is done away with.
“Properly motivated, it could be executed very quickly by FCA,” CEO Sergio Marchionne told analysts during a conference call from earlier this year.
Meanwhile, Lentz feels confident it won’t ever come to that. “Hopefully, that is not going to even be considered,” he said. “The risk is that if things got that difficult, then manufacturing leaves North America because an automaker might say that ‘as long as I’m going to pay a chicken tax, I might as well make these in Thailand or somewhere else. I might as well make them in China.'”
“There aren’t many times in the auto industry that importers, domestic nameplates, that everyone agrees. We have to really understand the unintended consequences of tinkering too much with NAFTA,” he explained.
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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