WASHINGTON (Reuters) – Toyota Motor Corp (7203.T) said on Wednesday it will build a new sport utility vehicle at a $1.6 billion joint venture assembly plant in Alabama rather than produce Corolla cars.
The largest Japanese automaker announced in January 2018 would build the factory in Alabama with Mazda Motor Corp (7261.T). Toyota, which said the shift was due to “a growing consumer appetite for light trucks and SUVs,” still expects to start production in 2021.
Last week, the company said U.S. Corolla sales fell 5% in the first six months to 152,868, while overall Toyota car sales fell 8%. Its U.S. SUV sales only fell 1% over the same period.
In recent years, American vehicle buyers have dramatically shifted away from cars to crossovers, SUVs and pickup trucks.
Still, U.S. auto industry sales have been declining, and there is some concern the new plant could exacerbate overcapacity and pressure vehicle prices. U.S. new vehicle sales fell 2.2% in the first half of 2019.
Toyota will continue to build Corolla cars at its Mississippi plant. Mazda said previously it would build a new SUV at the joint venture plant that will assemble up to 300,000 vehicles annually.
The plant is on a 2,500-acre site about 14 miles from Toyota’s engine plant in Huntsville, Alabama.
Among U.S. states, Alabama is already the fifth largest producer of cars and light trucks. The state has more than 150 major auto suppliers and 57,000 automotive manufacturing jobs.
Early in 2017, then-President-elect Donald Trump criticized Toyota and threatened hefty tariffs against the Japanese automaker if it built its Corolla sedan for the U.S. market in Mexico.
Toyota said in October 2017 it would shift production of Corollas from Canada to the new venture rather than Guanajuato, and would build Tacoma pickups in Mexico instead.
Toyota will now rely on its Mississippi plant and Japan for Corolla production, a spokesman said.
Reporting by David Shepardson; Editing by Bernadette Baum