Toyota: Expanding sales of light trucks and hybrids in the U.S.

Investing USD 13 billion in U.S. over 5 years, and reallocating production by platform

2020/04/13

Summary

RAV4 Prime
U.S. spec RAV4 Prime (PHEV) to be introduced in the U.S. and Japan markets in the summer of 2020 (Source: Toyota; same for all below)

  This report provides an overview of Toyota's U.S. operations. Toyota is implementing its plan to enhance both its product development and production capacity of light trucks and hybrid vehicles in the U.S.

  The company plans to invest USD 13 billion (approximately JPY 1.43 trillion) in the U.S. over the five year period from 2017 to 2021. In addition to starting production at its new Alabama plant in 2021 jointly with Mazda, the company is increasing its investment in its flagship plants in Indiana, Kentucky, and Texas and is enhancing the production of light trucks and hybrid vehicles. By doing so, it will strengthen powertrain production to achieve the 75% regional value content (RCV) required by the United States-Mexico-Canada Agreement (USMCA; new NAFTA).

  For light trucks, the company is developing the new F1 platform, which will be adopted for both full-sized and mid-sized body-on-frame vehicles. Increasing its appeal, the F1 platform offers TRD (Toyota Racing Development) specifications with enhanced off-road performance.

  For hybrid vehicles, from 2017, Toyota has adopted a hybrid system equipped with a 2.5-liter dynamic force engine based on the TNGA concept. The system realizes excellent fuel economy and comfortable acceleration performance. In addition to the conventional fuel-saving benefits, the company will promote an image of hybrid technology as powerful. The company plans to increase the ratio of hybrid vehicles sold in the U.S. from 11.5% in 2019 to 15% in 2020.


  On March 19, 2020, Toyota announced that it would be suspending production at all of its automobile and components plants in the U.S., Canada, and Mexico for a two-week period from March 23 to April 3 to protect the health of its employees and other stakeholders from the ongoing COVID-19 pandemic and to respond to the sharp decline in vehicle demand. On March 26, the company announced that the production suspension period would be extended to April 17.

  Regarding Japan domestic factories, on March 23, it was announced that, in consideration of the overseas market situation and reduced demand, Toyota will suspend production operations for seven lines at five plants for a certain period beginning April 3 (the suspension period varies depending on the plant and line, and the longest suspension period is 9 working days for No. 1 line at the Kyushu Plant).


Related reports:
Toyota: Deepens alliances with Subaru, Mazda and Suzuki to strengthen competitiveness (Jan. 2020)
Tokyo Motor Show 2019: Toyota Exhibits an Array of EVs, FCVs, and Mobility Solutions (Nov. 2019)
Toyota: Electrified vehicle plan pulled ahead 5 years to 5.5 million units by 2025 (Jun. 2019)

 



Increasing investment from USD 10 billion to USD 13 billion in the U.S.

  In January 2017, Toyota responded to U.S. president-elect Trump's comments urging automakers to expand their investment and employment in the U.S., announcing that Toyota would invest a total of USD 10 billion over the five year period from 2017 to 2021. In March 2019, the company announced that it would further increase its investments to USD 13 billion over the same period.

  Toyota will use these investments to increase the manufacturing of light trucks and hybrid vehicles, and to expand local production in the U.S. in response to the new terms required by the USMCA (new NAFTA).

 

Finished vehicle and powertrain production capacity in North America (announced from 2017 to March 2020)

Announcement timing Summary of announcement
January 2017 • Invest USD 10 billion in the U.S. over the next five years.
• Invest USD 600 million in the Indiana Plant, upgrade equipment and increase production capacity by 40,000 units.
August 2017 • Invest about USD 1.6 billion jointly with Mazda to construct a new plant with an annual production capacity of 300,000 units and start production by 2021.
January 2018 • Decided to build a joint venture with Mazda in Huntsville, Alabama. It will produce the Toyota Corolla and Mazda crossover models.
March 2019 • Invest USD 750 million to increase production of Lexus ES and RAV4 hybrid vehicles at the Kentucky plant. In addition, the company will increase powertrain production capacity (see the table for details).
• The USD 10 billion investment in the U.S. announced in January 2017 is expected to increase to a total of USD 13 billion.
April 2019 • Aisin AW announced that it will increase its manufacturing sites and the production of automatic transmissions and hybrid transmissions for SUVs.
• The Lexus NX compact SUV will be produced in 2022 at the Cambridge plant in Canada, which manufactures the RAV4 and Lexus RX. The company has invested approximately USD 1 billion to modernize the plant to manufacture the new RAV4, which  launched in the spring of 2019, including TNGA-based platform production.
July 2019 • Toyota announced that it would replace production of the Corolla at the Alabama plant jointly operated with Mazda with a new, yet-to-be-announced SUV.
September 2019 • Toyota announced that it will invest USD 400 million in its Texas plant and introduce new production equipment to improve its medium- to long-term competitiveness (as part of the USD 13 billion investment).
• Aisin AW announced that it will locate its new plant, which it announced it would build in April, in Ciboro, Texas, with a production capacity of 200,000 units per year.
January 2020 • The company modernized its Indiana plant by investing USD 700 million, in addition to the USD 600 million announced in January 2017, representing a total new investment of USD 1.3 billion.
• At the same time, the company announced that it will reallocate production models based on its TNGA and other platforms and architectures.

Source: Toyota’s press releases

 



Production of Lexus ES and RAV4 hybrid vehicles, strengthening local production of powertrains

Lexus ES300h
Lexus ES300h

  In March 2019, the company announced that it will invest USD 750 million to increase the local production of vehicles and powertrains in five U.S. states.

  Specifically, the Kentucky plant will start producing Lexus ES hybrid vehicles from May 2019 and RAV4 hybrid vehicles from January 2020. The annual production capacity of ES hybrid vehicles is about 12,000, and the production capacity of RAV4 hybrid vehicles is about 100,000 vehicles per year.

  Regarding powertrains, the West Virginia Plant has already announced that it will produce 120,000 hybrid transaxles (transmissions) per year from 2020, but will increase its production capacity by 120,000 units by 2021. This corresponds to Toyota's hybrid vehicle enhancement plan (elaborated on later in report). At the Alabama engine plant, the production capacity of 4-cylinder engines and V6 engines will be increased by 230,000 units per year by 2021.

  At the same time, the company announced that it would increase its USD 10 billion investment plan announced in January 2017 to USD 13 billion by promoting new investments, including the construction of a new plant in Alabama with Mazda.

 

Aisin AW builds new AT plant in Texas

  In April 2019, Aisin AW announced that it will establish a new manufacturing site in the U.S. and in September announced that the site will be located in Ciboro, Texas.

  Aisin AW established AW Texas Co., Ltd. to manufacture automatic transmissions. In connection with the construction of the new plant, the company plans to invest up to about USD 400 million and create about 900 new jobs over the five year period to 2023. The company is preparing for the start of production in September 2021.

 

Increase local production of vehicles and powertrains

Plant Models/components Timing Production capacity Investment
amount
Kentucky Lexus ES hybrid May 2019- 12,000 USD 238 million
Toyota RAV4 hybrid January 2020- 100,000
West Virginia Hybrid transmission 2020- 120,000
2021 additional 120,000 USD 111 million
Alabama engine plant 4-cylinder engine
and V6 engine
2021- 230,000 USD 288 million
Bodine's Troy Plant Increase production of castings (engine cylinder heads) production increase USD 62 million
Bodine's Jaxkson Plant Increase production of castings (engine blocks, etc.) production increase USD 5 million
Source: Toyota's press release dated March 3, 2019 Total USD 750 million

 

<Compliance with USMCA (new NAFTA) terms:>
  Under the USMCA (New NAFTA), the regional value content (RVC) of auto parts will be raised from the current 62.5% to 75% as a condition for the elimination of tariffs on imports and exports within the region. Failure to comply will result in a 2.5% tariff on passenger cars and a 25% tariff on pickup trucks. Toyota is currently not meeting the requirements at around 70%, so it is strengthening its local production in North America.

  The USMCA details have already been finalized in the U.S. and Mexico and is currently being ratified in Canada.

 



Reallocation of production models by platform at the Texas, Indiana and Mexico plants

  Toyota strengthened its Texas and Indiana plants and started operations at its Guanajuato plant in Mexico at the end of 2019. In parallel, the company will reallocate production at each plant for models sharing the platform and architecture.

 

Realignment of production models

Plant Current production models After realignment
Future models Platform
Texas Tundra Tundra

F1
(for body-on-frame vehicles)

Tacoma
(Cease production in 2021)

Sequoia
(Start of production from 2022)

Indiana Highlander(incl.HV) Highlander(incl.HV)
Sienna
GA-K(TNGA)
Sienna

Sequoia
(Cease production by 2022)

Guanajuato (Mexico) Tacoma
(Began assembly at the end of 2019)
F1
(for body-on-frame vehicles)
Tijuana (Mexico) Tacoma Tacoma

Source: Toyota’s press release dated January 17, 2020

フルサイズのbody-on-frame車を生産 HighlanderとSiennaを生産
The Texas plant produces full-size body-on-frame vehicles (Tundra and Sequoia) The Indiana plant produces the Highlander and Sienna

 

USD 400 million invested in Texas plant to produce full-size body-on-frame vehicles

  In September 2019, Toyota announced that it would invest USD 391 million in the Texas plant by 2021.

  Taking into account the U.S. market environment where the demand for light trucks continues to remain high, and with the aim of improving its medium- to long-term competitiveness in the U.S., Toyota will upgrade its plant in Texas, including the introduction of new production equipment. Toyota will expand the use of Cobots (Co-robots, small robots that are responsible for relatively lightweight tasks in the same workspace as human workers and increase production capacity.

Reallocation of production models at Texas Plant:
  The Texas plant is currently manufacturing the Tundra and Tacoma, but will cease production of the Tacoma in 2021, and begin assembly of the Sequoia full-size SUV. The Texas plant will focus on production of two full-size frame vehicles (Tundra and Sequoia). All Tacomas will be assembled at Toyota’s two plants in Mexico.

 

USD 1.3 billion invested in Indiana plant to produce Highlander and Sienna

  Toyota will invest USD 1.3 billion in its Indiana plant, including the USD 600 million announced in January 2017, to strengthen production capacity. Taking advantage of Highlander's adoption of the TNGA, the production line has been renovated, and annual production capacity has been increased by 40,000 units. The production of the Sequoia large-size SUV will be transferred to its Texas plant by 2022, and the Indiana plant will focus on the production of the Highlander and the Sienna mid-size minivan.

 

Production of the Tacoma at two plants in Mexico

  In Mexico, the Tacoma is manufactured at the Tijuana plant in Baja California (annual capacity 160,000 vehicles). The new plant in Guanajuato, which started operations in December 2019, will also produce up to 100,000 Tacoma vehicles annually. The Tacoma combined production capacity of both plants is expected to reach 260,000 trucks a year when at full capacity. Toyota will export 95% of the pickups manufactured in Mexico to the U.S.

 



Increasing production of the RAV4, Highlander and Tacoma in North America

  The ratio of light trucks in the U.S. light vehicles market in 2019 rose to 72.0%. Toyota's light truck ratio, which is 7-8 percentage points lower than total U.S. demand, has risen every year, reaching 64.3% in 2019. As shown in the table below, sales of Toyota's key light trucks, the RAV4, Highlander and Tacoma are growing, and Toyota’s strategy is to further strengthen this trend.

  In addition, Toyota is expecting sales of the Tundra and Tacoma pickup trucks to increase going forward as a result of increased production capacity, resolving the situation it has experienced where its sales have been constrained due to insufficient production capacity.

  The models to be manufactured jointly with Mazda at the new Alabama plant has been changed, with Toyota building a new, yet-to-be-announced SUV rather than the Corolla as originally planned.

2020 4Runner TRD-Pro 2021 Highlander XSE 2021 RAV4 Trail Edition
2020 4Runner TRD-Pro 2021 Highlander XSE 2021 RAV4 Trail Edition
2021 Tacoma Trail Edition 2021 Tundra Trail Edition 2020 Lexus RX 350F Sport
2021 Tacoma Trail Edition 2021 Tundra Trail Edition 2020 Lexus RX 350F Sport

 

Unit sales of Toyota’s key light trucks in the US

2016 2017 2018 2019 Jan.-Feb. 2019 Jan.-Feb. 2020

4Runner

111,970 128,296 139,694 131,888 20,319 20,254

Highlander

191,379 215,775 244,511 239,438 31,797 37,183
RAV4 352,154 407,594 427,170 448,071 50,654 72,756

Tacoma

191,631 198,124 245,659 248,801 35,385 37,721

Tundra

115,489 116,285 118,258 111,673 14,749 14,714

Lexus RX

109,435 108,307 111,641 111,036 12,562 15,313

Total light trucks

1,302,073 1,419,420 1,532,601 1,533,351 200,717 230,961

Source: Automotive News
Note: The light truck total includes models other than the above 6 models.

 

Ratio of Toyota vehicles’ passenger car/light truck in the US

2016 2017 2018 2019 Jan.-Feb. 2019 Jan.-Feb. 2020
Toyota Passenger car 46.8% 41.7% 36.8% 35.7% 38.9% 35.8%
Light truck 53.2% 58.3% 63.2% 64.3% 61.1% 64.2%
Total US Passenger car 39.3% 35.5% 30.8% 28.0%
Light truck 60.7% 64.5% 69.2% 72.0%

Source: Automotive News



Product development: Aiming to strengthen light trucks and hybrid vehicles

  Product development at Toyota’s U.S. operations is focused on light trucks and hybrid vehicles.

 

Produce all body-on-frame vehicles on one platform

  Toyota's next Tundra full-size pickup and Tacoma mid-sized pickup truck models will be manufactured on a shared platform (referred to as the F1 platform internally at Toyota). Currently, the Tundra and Tacoma are assembled on the same line at the Texas plant, but the Tacoma is also produced at one of its Mexican plants, with each model based on separate platforms. The new F1 platform will be adopted for the Tundra in 2021 and the Tacoma in 2023, and will be gradually rolled out to other body-on-frame vehicles. Production of the Sequoia full-size SUV will be transferred to the Texas plant in 2022 and new models will be based on the F1 platform.

Promoting its line of TRD vehicles with enhanced off-road performance:

  The company is also strengthening the specifications of its TRD (Toyota Racing Development) vehicles with enhanced off-road performance with chassis equipment such as suspension and 4WD control, mainly for light trucks sold in the U.S. It has been reported that more than 40% of Tacoma, Tundra, Sequoia, and 4Runner body-on-frame vehicles are TRD specification vehicles.

 

Conveying the "powerful image" of hybrid vehicles, becoming a mainstay product

  To date, Toyota's hybrid vehicles, as represented by the Prius, have had the image of being fuel-efficient, but going forward Toyota will promote the image of hybrids as "powerful". From 2017, Toyota has adopted a hybrid system equipped with a 2.5-liter dynamic force engine based on the TNGA concept. The system realizes excellent fuel economy and comfortable acceleration performance. After the launch of the new RAV4 hybrid vehicle in April 2019, the ratio of hybrid variants in the RAV4 series increased from around 12% to 25%. Current Toyota hybrid technology can now provide fuel economy to customers who desire fuel economy as well as performance to customers who desire performance, making hybrid vehicles one of Toyota’s mainstay products. In 2019, 11.5% of all Toyota vehicles sold were HVs, but it is aiming to increase that ratio to 15% by 2020.

  The RAV4 Prime, which will be launched in the U.S. and Japan markets in the summer of 2020 (the second PHV to be sold in the U.S. following the Prius Prime), will also gain appeal as being powerful.

Plans to sell 5.5 million electric vehicles worldwide by 2025:

  In June 2019, Toyota announced plans to sell 5.5 million electric vehicles worldwide in 2025 (five years ahead of the plan announced in December 2017 to sell 5.5 million units in 2030). EVs and FCVs are expected to comprise less than 1 million of the total of 5.5 million units, so the sales of hybrid vehicles will double from the about 2 million units sold in 2019 to more than 4.5 million units in 2025. Toyota is actively expanding the sales of hybrid vehicles in the United States.

 

Unit sales of Toyota’s hybrid vehicles in the US

Brand Total Ratio of hybrid vehicles Total US sales
Toyota Lexus
2015 - - 186,278 7.5% 2,499,313
2016 - - 181,731 7.4% 2,449,630
2017 - - 159,221 6.5% 2,434,515
2018 182,851 30,503 213,354 8.8% 2,426,673
2019 230,889 43,661 274,550 11.5% 2,383,348

Source: Toyota Motor North America、Automotive News 2020.1.13

 

Will EVs be launched in the U.S. in 2023?

  Toyota plans to launch EVs in Europe and China by 2020, and C-segment crossover EV in the U.S. in 2023 (from media reports such as Automotive News dated August 5, 2019).

  Toyota believes that although the market for EVs in the U.S. is still not mature, EVs will become popular in the U.S. if they can be charged quickly, have a range of 350 to 400 miles, and can be priced at a level equivalent with that of gasoline-powered vehicles. Also, the EVs that Toyota will launch in Europe and China can be launched in other markets, and if the conditions (e.g. performance, infrastructure) for introducing EVs can be met, then it will be possible for Toyota to develop U.S. specification vehicles quickly.


☆ Refer to MarkLines model change forecast for details on Toyota's new model launch schedule in the U.S.
   https://www.marklines.com/en/modelchange/toyota_na_model

 



Toyota’s unit sales of passenger car/light truck in the US

Toyota’s sales in the US

2016 2017 2018 2019 Jan.-Feb. 2019 Jan.-Feb. 2020
Toyota Passenger car 1,011,503 910,805 801,412 769,022 117,163 119,000
Light truck 1,106,899 1,218,578 1,326,951 1,316,212 174,064 200,257
Total 2,118,402 2,129,383 2,128,363 2,085,234 291,227 319,257
Lexus Passenger car 136,054 104,290 92,660 80,975 10,889 10,056
Light truck 195,174 200,842 205,650 217,139 26,653 30,704
Total 331,228 305,132 298,310 298,114 37,542 40,760
Total US Toyota Passenger car 1,147,557 1,015,095 894,072 849,997 128,052 129,056
Light truck 1,302,073 1,419,420 1,532,601 1,533,351 200,717 230,961
Total 2,449,630 2,434,515 2,426,673 2,383,348 328,769 360,017
Market share 14.0% 14.1% 14.0% 13.9%
Total US Industry Passenger car 6,895,771 6,120,774 5,342,223 4,790,846
Light truck 10,657,658 11,125,098 11,976,738 12,317,310
Total 17,553,429 17,245,872 17,318,961 17,108,156

(Note) Toyota brand’s unit sales of passenger cars include those of Scion brand.

 
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Keywords:
Toyota, US market, Alabama, Texas, Indiana, Guanajuato, Kentucky, RAV4, Highlander, F1 platform, Tacoma, Tundra

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