Toyota Said to Join Mexico Auto Rush as Ford Spends $2.5 Billion

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Mexico’s simmering auto industry is rising to a boil with a plant from Toyota Motor Corp. and a $2.5 billion investment from Ford Motor Co.

Toyota will announce its first Mexico factory on Wednesday, said two people with direct knowledge of the matter. Ford will invest in two plants, said a person familiar with the company’s plans. And Hyundai Motor Co. said it will seek to build a factory once the company’s Mexican sales rise.

The new investments boost the profile of Latin America’s automaking powerhouse after a roster of global car companies said they’d set up shop in Mexico. In 2014, Kia Motors Corp. announced its first plant in Mexico, following pledges by BMW AG for a new factory and Daimler AG and Nissan Motor Co. for a joint operation. Nissan, Honda Motor Co. and Mazda Motor Corp. have all opened new manufacturing facilities in Mexico since November 2013.

“The economics of auto production in Mexico make sense,” said Michelle Krebs, an analyst with researcher Autotrader.com. “And they have proven their quality is good. I drive a Mexican-built Ford Fusion that Consumer Reports has said is every bit as good as a Toyota Camry.”

Beyond low labor costs, Mexico is “a good export base,” Krebs said. “Everybody is there, the infrastructure is there, the logistics are good because you’re not shipping anything across an ocean and you’ve got the North American Free Trade Agreement.”

200,000 Corollas

Toyota, the world’s largest automaker, will spend about $1 billion building the plant, which will be able to assemble 200,000 Corolla cars a year for the North American market, one person said.

“There has not been a decision to build a new plant,” Ryo Sakai, a spokesman for Toyota, said by e-mail. “We are always considering a globally optimized production structure.”

Dearborn, Michigan-based Ford, the second-largest U.S. automaker may announce this week a plan to spend $1.3 billion to expand its Chihuahua engine plant and $1.2 billion to build a transmission factory in Guanajuato state, according to the person familiar with the matter. Ford will produce two new diesel engines in the Chihuahua facility, the person said.

“We cannot comment on future product or manufacturing plans,” Kristina Adamski, a Ford spokeswoman, said in an e-mail.

Hyundai, South Korea’s biggest automaker, probably will wait until its annual Mexican sales exceed 50,000 vehicles before opening a plant, said Pedro Albarran, managing director for Hyundai Motor de Mexico. He said a Mexico factory probably would build more than 100,000 vehicles a year, including subcompact models popular in in the country.

Important Base

“Hyundai wants to turn Mexico into a very important base for its global production,” Albarran said Tuesday in an interview in his Mexico City office. “I’m sure that over the years we’ll see production of Hyundai products in Mexico.”

Ford, which this year is to negotiate a new contract with the United Auto Workers union, has said its labor costs are not competitive with foreign automakers operating in the U.S. New production in Mexico probably will rankle the union, Krebs said.

“The UAW is not going to be happy about this,” Krebs said. “The timing of this is very interesting, coming on the eve of very important negotiations. Ford has been pretty clear that it feels it’s disadvantaged by the current UAW contract.”

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