Toyota to make more pickup trucks at Mexican plant in shift from U.S.

APASEO EL GRANDE, Mexico (Reuters) – Toyota Motor Corp (7203.T) will ramp up production at its new Mexican plant to 100,000 vehicles a year by 2021 in a major step to shift production of its popular mid-size Tacoma pickup truck to Mexico from the United States, the company said on Thursday.

The plant in the central state of Guanajuato, along with an older facility near the U.S. border, will bring Toyota’s Mexican production to 266,000 trucks a year when at full capacity, Japan’s largest automaker said.

Toyota said it expects to send 95% of pickups from the two plants to the United States, where the automaker sold nearly 249,000 Tacomas last year, up 1.3%.

“Tacoma production will be concentrated right here in Mexico,” Christopher Reynolds, a chief administrative officer for Toyota in North America, said at an event to inaugurate the Guanajuato plant. “What this means is that the Mexican manufacturing facilities of Toyota will build all the Tacomas that serve the mid-size pickup segment in the North American market.”

Toyota said last month it will move Tacoma production from the United States to Mexico as it adjusts production around North America. It said the decision would “improve the operational speed, competitiveness and transformation at its North American vehicle assembly plants based on platforms and common architectures.”

Asked about the possibility of angering U.S. President Donald Trump with the decision to move Tacoma production to Mexico, Luis Lozano, head of institutional relations for Toyota Mexico, said, “We don’t make business decisions based on politics. We are a company that thinks about the very long term and that we’re going to be here long after many people have gone.”

Lozano noted that Toyota maintains a big production footprint and employs more than 30,000 workers in the United States.

Toyota has pumped $700 million into the Guanajuato site, which began operating last December. Toyota began making Tacoma trucks in 2003 at its plant in Mexico’s northern border city of Tecate, where last year it turned out close to 167,000 pickups.

Automotive exports from Mexico fell for the first time in a decade last year, dragged down by weak demand from outside the United States, and industry groups project another drop in 2020.

Lozano said the company will not need to make major supply changes on the back of the new regional U.S.-Mexico-Canada trade accord that replaced the North American Free Trade Agreement that Trump had criticized.

One of the biggest changes requires increased North American content in cars and trucks built in the region – to 75% from 62.5% under NAFTA – with new mandates to use North American steel and aluminum.

In addition, 40% to 45% of a vehicle’s value must come from “high wage” areas paying workers at least $16 an hour, namely the United States and Canada, a provision aimed at slowing the industry’s migration to lower-wage Mexico. Vehicles that fail to meet the standard would be subject to U.S. tariffs.

“We don’t have to make very large adjustments within our value chain in North America because for a long time we have had a value chain which is very deep, very sophisticated and very integrated,” Lozano said.

“It is not an issue that will require greater efforts or investments to comply. We will fulfill it to the letter.”