Is Toyota Just Sucking Up to Trump?

Some might argue that Toyota is sucking up to President Trump, but the Japanese auto giant sees itself as covering all of its bases and laying the groundwork for a more profitable foray into the light truck and SUV market. The company is making a very interesting bet during a fraught time in the North American auto industry as the North American Free Trade Agreement is going through its first major overhaul in over a quarter century.

 

Toyota recently announced that it plans to invest over $800 million dollars in a new plant in the United States, but has not scrapped its plan for a new Mexican plant, much to the chagrin of US President Donald Trump. It is also moving forward with plans for a Canadian expansion despite any lingering worries the company might have over potential changes to NAFTA.

Could this end up being a really good thing for the company? On the plus side, Toyota will create jobs in the US but won’t lose any investments in Canada or Mexico – not bad. So what would the downside look like? Well, demand in the American market may start to wane at the same time as the company needs to invest in a new wave of research and development in electrification and autonomy; having two plants come online at the same time may prove to end up delivering an expensive oversupply in a down market. The company, however, sees this as an opportunity to get back into the truck game (and fast) as, unlike General Motors, Toyota has a capacity issue and cannot keep up with demand. The company’s consumer base eroded as buyers are anxious to get into a new light truck or SUV and switched other manufacturer’s offerings. Right now, Toyota prioritizes increased capacity in North America.

President Trump might talk a big game, but major automakers are still invested in Canada and Mexico in addition to the United States. It’s not a zero-sum game. Toyota is more than willing to build vehicles for all three markets. In fact, Toyota is committing to the North American market like never before, and only time will tell if they are making the right bet.