Toyota heading for Mexico too?

After Kia Motors, could Toyota Motor Corporation be seeking a location for a new plant in Mexico?

According to rumours, the automaker is understood to be reviewing several Mexican states and company executives have met with Mexican federal officials for preliminary talks on the potential new plant, according to sources “with direct knowledge of the matter”. 

The size and timing for this possible production capacity increase has not been revealed, however a Toyota spokesperson told Blomberg News “We are always evaluating opportunities in North America in line with market demand, but no decisions have been made.”

Toyota currently operates a completely knocked-down (CKD) plant in Tijuana, which has annual capacity of 63,000. The plant builds the Tacoma. Additionally, Mazda will begin building a subcompact for Toyota in 2016, at a rate of about 50,000 units per year

Toyota is one of the few major automakers without a vehicle assembly facility in Mexico, with Korean Kia Motors being the latest automotive manufacturer to announce investment into the country.

The lower cost of labour, transportation infrastructure and 45 free-trade agreements make Mexico particularly attractive in today’s vehicle market.

Toyota Motor Corporation’s vehicle production has grown from 5.36 million units in 2000 to a forecasted 8.16 million in 2020, including the potential Mexican capacity. 

Forecasters are suggesting Toyota could begin production in Mexico by 2018, reaching 131,000 units in 2020.  Industry observers also point to the plant building B and C segment cars, following the trend for additive Mexico production capacity planned for compact and subcompact vehicle production.

The possibility of lower labour costs and access to a number of markets where these are the most popular size of car makes producing them in Mexico more attractive than in the US.

Forecasters suggest production of C segment vehicles in Mexico could increase from 49.4 per cent of the country’s output to 51.3 per cent in 2020.

Production of B-segment vehicles could take a larger share of the gain, up from nearly 11 per cent in 2011 to 20 per cent in 2020, as a result of the new production capacity. 

The increase in B- and C-segment vehicles is likely to harm sales of D-Segment production which could fall almost ten percentage points from 37.4 per cent in 2011 to 27.8 per cent in 2020.