Joint Venture of Mazda and Toyota at Alabama Plant Will Cost $2.3 Billion

A new joint venture was established between the two Japanese automobile giants, Mazda Motor Corp. (Mazda) and Toyota Motor Corp. (Toyota) in the early week of March 2018, to build a production facility worth $1.6 billion at Huntsville, Alabama, the United States (US). Now, the plant would be costlier than the originally-estimated budget since the companies have decided to continue the construction of the facility during the COVID-19 pandemic. However, the opening of the plant is likely to be happening as per the original plan despite the prevailing threat of labor shortage and financial crunch impacted by the pandemic.

Alabama Plant

The Alabama plant is scheduled to start its production of vehicles in 2021 with a target of annual production capacity of 300,000 units, 50% of the total vehicles each for both companies. Under the new joint venture company name, “Mazda Toyota Manufacturing, U.S.A., Inc.” (MTMUS) has set to employ up to 4,000; out of which 600 employees are already hired to date by the new company.

Annually, the new plant aims to produce 150,000 units of Mazda’s crossover model, which will be introduced for the first time in the North American markets and 150,000 units of the Toyota Corolla sport utility vehicles (SUVs) model. Considering the advantages associated with the plant in the state, the Alabama state government had previously provided over $700 million in tax incentives to the new company. Alabama Governor Kay Ivey said in a statement, “Mazda and Toyota’s increased commitment to the development of this manufacturing plant reiterates their belief in the future of manufacturing in America and the potential for the state of Alabama to be an economic leader in the wake of unprecedented economic change.”

“The new plant, which will be Toyota’s 11th manufacturing facility in the US, not only represents our continuous commitment in this country but also is a key factor in improving our competitiveness of manufacturing in the US,” said Hironori Kagohashi, executive general manager of Toyota and MTMUS’s Executive Vice President.

Costlier Plant due to Covid-19 Pandemic

On Thursday, August 13, 2020, Toyota and Mazda released a joint statement saying that the companies would now have to invest $2.3 billion for the production unit at Alabama, which was $830 million more than the original plan in 2018. To meet the expected date for the opening of the facility next year, MTMUS continued its construction work of the plant amid the challenges caused by the COVID-19 outbreak. This led to cause the company to spend about 50% more expensive than the early estimation. A source said, however, these Japanese automakers are expected to receive $97 million tax incentives for the additional investment.

In September 2019, President Donald Trump and Japanese Prime Minister Shinzo Abe signed a bilateral trade deal, which allowed tariffs reduction on US farm goods, Japanese machine tools, and other products. However, despite Trump’s warning to impose more tariffs, the current auto tariffs of 2.5% on passenger vehicles and 25% on pickup trucks remain unchanged between the two countries.

While the question on auto-export remains uncertain, Japan exported 1.7 million vehicles last year to the US, which accounted for about 10% of US total vehicle sales. Currently, Toyota is operating 14 manufacturing plants in the North American region with 11 in the US and has sold more than 2.7 million cars and trucks with 2.4 million in the US in 2017.

I’m Roshan, a journalist, blogger and music lover. I like covering global news related to finance, business, and technology. Focusing on the collection of true and reliable information, I rely on working by conducting interviews with business leaders and talking to the inside sources of companies.

You can reach out to me at: [email protected]

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