Toyota's Truck Production Plans Largely Dependent on NAFTA Existing

Matt Posky
by Matt Posky

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]

Matt Posky
Matt Posky

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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  • 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!

  • TheEndlessEnigma Simply put, I like it.
  • TheEndlessEnigma Ah GM, never stop being you. GM is working hard to make FIAT look good.
  • TheEndlessEnigma Top Gear of the 2000's was a fresh concept and very well done. Sadly to say there isn't a TV show concept that doesn't eventually exhaust fresh ideas and, as a result, begins to rehash and wear out once were fresh ideas. The show eventually becomes a pale imitation of itself, then begins to embarrass itself, it will get to a point where it jumps the shark. Top Gear began to get stale, the Clarkson, Hammond and May left and the formula failed - surprise! the presenters were part of the magic. Fast forward many years and Grand Tower is trying hard to be Top Gear but it's all very obviously scripted (it always was by felt spontaneous in its original form), Clarkson, Hammond and May are much older, tired and have become caricatures of themselves. Guys, just stop. You should have stopped 10 years ago. Now you're just screwing with your reputations and legacies.
  • FreedMike Kudos to Toyota for making a legitimately slick looking piece (particularly in metallic cherry red). But PHEVs seem like a very narrow niche to me. Yes, the concept is cool - if you play your cards right you never have to fill up with gas, and the gas engine means you don't have to worry about charging facilities - but the operative words are "if you play your cards right." And PHEVs have all the drawbacks of EVs - spotty charging availability, decreased range in cold conditions, and higher price. Personally, I'd opt for a non plug-in Prius and use the plug-in money to upgrade the trim level. It's slower, but even the base Prius performs roughly on par with a Corolla or Civic, so it's not a dog anymore. But who buys a Prius to go fast in the first place? If I wanted to "go gas free," I'd just buy a BEV. YMMV, of course.
  • Analoggrotto Anyone seeking benchmark affluence will get the EV9 by Kia the most cutting edge electric vehicle on the market bar none.