Toyota's Truck Production Plans Largely Dependent on NAFTA Existing

Matt Posky
by Matt Posky
toyotas 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.

[Image: Toyota]

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6 of 51 comments
  • DenverMike DenverMike on Nov 13, 2017

    There's a lot of options to be exploited here, not so much the OMG The Sky is Falling. The Mexico Corolla would only face a 2.5% import tax if NAFTA was killed, so it's Tacoma assembly that would come back to the US. Still a 90% assembled Taco crossing the border would avoid the Chicken tax completely for around 3% added costs to finish.

    • See 2 previous
    • SpinnyD SpinnyD on Nov 13, 2017

      @Art Vandelay San Antonio has been at capacity for a long time now, they are working their tails off building most of the Tacomas already, They can't absorb any more.

  • King of Eldorado King of Eldorado on Nov 13, 2017

    Or, they could simply end the chicken tax alone, independently of what happens to NAFTA, no? It's always been anticompetitive, not to mention giving rise to ridiculous work-arounds such as shipping cargo vans over as passenger vehicles and then removing the seats.

    • DenverMike DenverMike on Nov 13, 2017

      The Chicken tax is more childish than anticompetitive. Europe needs to drop their Chicken tax 1st and they started it!

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