Toyota and Mazda to Build $1.6 Billion U.S. Plant

August 4, 2017, 10:42 AM UTC

Japanese automakers Toyota Motor and Mazda Motor said Friday they plan to build a $1.6 billion U.S. assembly plant, part of a broader alliance that will also see them invest in each other and share the cost of developing electric vehicles.

The plant, which is set to start operating in 2021, will be capable of producing 300,000 vehicles a year, and employ about 4,000 people, the companies said in regulatory filings. It will make crossover SUVs for Mazda and Corolla sedans for Toyota.

The announcement looks like another boost for President Donald Trump, who campaigned on promises to increase manufacturing and expand employment for American autoworkers. In January, Trump threatened to impose a hefty tax on Toyota if it chose to build the new Corolla for the U.S. market in Mexico.

The two companies’ plans to jointly develop electric vehicles comes as tightening global emissions regulations prompt more automakers to develop battery powered cars. Toyota and Mazda will also work together to develop in-car information technologies and automated driving functions. The alliance will be underpinned by a small cross-shareholding: Toyota will take a 5% stake in its smaller rival as part of the new joint venture, while Mazda will take a 0.25% stake in Toyota.

Global car makers are facing massive costs to quickly develop new technologies in lower-emission cars and self-driving cars.

Last year, Nissan took a controlling stake in Mitsubishi Motors with both companies saying that the partnership would allow them to jointly develop plug-in hybrid vehicles and automated driving technologies.

Toyota has been courting a number of Japanese automakers in the past few years, announcing in February that it and compact car maker Suzuki Motor planned to cooperate in R&D projects while Toyota would tap its smaller rival’s expertise in emerging Asian markets.

It also has a long-standing partnership with Subaru, under which the two automakers jointly developed a compact sports car model which is manufactured by Subaru.

Mazda, whose annual global vehicle sales are one-eighth that of Toyota, caters to a specific audience largely in North America with its design-conscious sedans and SUVs, and has been focusing on developing more fuel-efficient gasoline engines.

With a limited R&D budget of around 140 billion yen this year—a fraction of around 1 trillion yen at Toyota—Mazda has said that it lacks the funds to develop electric cars on its own, a view also shared by Subaru and Suzuki.

Toyota has set a goal for all of its vehicles to be zero emission by 2050. Last year it established a division to develop full-sized EVs, shifting gears after long favoring EVs only for short-distance commuting given their limited driving range and lengthy charging time.