Toyota To Try Transporting Tercels To Texas (and Other States) From Europe
Pardon the alliteration. It’s late and I’m feeling a little loopy. Of course, Toyota hasn’t called its B-segment model the Tercel since 2000, but something like “Yen’s Strength Means Toyota Will Export the Yaris from France to the US” didn’t seem to quite catch the reader’s eye the same way.
At any rate, it’s true: for the first time ever, Toyota will build a car in Europe (specifically, its Valenciennes, France plant) and ship it to the United States for sale. The car of choice is the Yaris, and Toyota plans to ship about 25,000 of them to North America each year. Currently, Toyota sources the Yaris from Japan, which doesn’t work for several reasons, but in particular, it has to be one of Toyota’s lowest-margin cars before currency effects are considered. With them, it’s losing money on every car it sells. As my dad says tongue-in-cheek when he loses money on a business deal, “it’s OK, I’ll make it up in volume.”
First, the strong yen makes Japanese exports very expensive. It’s the same reason Toyota, Nissan, Honda, and even Mazda are scrambling to bulk up local manufacturing in the US and in Mexico, to get the hell out of Japan. Wages and taxes are also high in Japan, and thanks to a reaction to the Fukushima nuclear accident in 2011, Japan has shut down all of its nuclear reactors, which means that energy will be more scarce and therefore more expensive for the foreseeable future.
Against that backdrop, there is a capacity glut in France, and automakers are dying to see a few underutilized plants close, but that’s very costly and difficult (sometimes, it’s literally impossible). So, this Yaris news may be a win-win for everybody. Toyota avoids the effects of the strong yen, workers in France get something to build (and possibly save their plant, though to be fair, there was no talk that I am aware of that the plant was in danger), and US consumers get more Yarises to buy.
Expect to see more made-in-Japan models shifting their production outside of their home base in the next few years. For starters, Acura, Infiniti, and Lexus are all shifting at least some production to North America. There may well be a day in the not-too-distant future when Japanese car companies make almost no new vehicles for export in Japan. Who would have ever made that prediction 2o or 25 years ago, around the time of the voluntary export restraint era (which turned into a complete flop for the Big Three)?