Toyota bets US$1.1bil on SUVs in Canada with Trudeau’s help

OTTAWA: Toyota Motor Corp is investing C$1.4bil (US$1.1bil) in its Canadian operations to build traditional and hybrid RAV4 sport utility vehicles, banking on the nation’s manufacturing sector amid a cloud of uncertainty from Nafta talks.

The Japanese automaker’s Canadian unit made the announcement Friday afternoon at its plant in Cambridge, Ontario, alongside Prime Minister Justin Trudeau and Ontario Premier Kathleen Wynne. The expansion there and in nearby Woodstock will create 450 jobs, supported by C$110mil each from the federal and provincial governments. The two Toyota plants west of Toronto now employ about 8,000 people and made more than 600,000 vehicles last year.

The investment will allow Canada to built a “hybrid ecosystem,” becoming the largest producer of hybrid Toyotas in North America and supporting Canada’s supply chain of auto-part markets, Trudeau said. “This is a great day for the auto sector,” he said.

Toyota and other automakers are shifting focus to meet consumers’ growing preference for SUVs over cars. Toyota, the world’s second-biggest carmaker, has already announced it will move assembly of the Corolla compact to the US to make room for RAV4 output. During 2017, Toyota sold 407,594 RAV4s in the US, topping Camry sedan sales for the first time.

“That type of investment is very good news for the province – at the same time it’s long overdue,” Rob Wildeboer, executive chairman at auto-parts maker Martinrea International Inc, said in an interview on BNN Bloomberg television last Friday. “We have not been punching above our weight in Ontario.” He called for lower corporate taxes to boost Canadian competitiveness.

The auto industry is at the heart of ongoing North American Free Trade Agreement talks, with ministers due to meet Monday in Washington. The US wants more cars and auto parts made in North America and is proposing to raise the share of content sourced from the region to 75% from the current 62.5%. The countries are pushing for a deal in principle this month in hopes of passing it in the current US congress, and before Mexico’s July 1 elections.

Toyota will also invest in Canadian research and development over 10 years, and create 1,000 new co-op placements with the announcement. New RAV4s, including hybrids, will be built at the two Ontario plants, Toyota Motor Manufacturing Canada president Fred Volf said at the news conference.

“We’re aggressively adopting new technology and innovative processes to ensure our ongoing success,” Volf said in a statement.