Yesterday, our colleagues at Motor Authority predicted that today's press event with Toyota president Akio Toyoda would include an announcement that the company is moving production of some Lexus vehicles to the U.S.
Move over, Walter Mercado, because it appears that our team was right.
At a press conference held jointly in New York City and at a Toyota plant in Georgetown, Kentucky, Toyoda said that Lexus will begin manufacturing the ES sedan in Georgetown. Production should begin in the second half of the 2015 calendar year.
Once it's up and running, the Lexus line at the Georgetown plant will manufacture around 50,000 ES models per year. Considering that Lexus sold 58,850 of the luxury sedans in the U.S. in 2012, that means that the vast majority of ES models sold here should be American-made. However, Toyota's plant in Kyushu, Japan -- where the ES has traditionally been built -- will continue ES production at current levels, meaning that the 50,000 units produced in America will boost total inventory.
WHY THE SHIFT?
Today's announcement is remarkable because, while Toyota manufactures plenty of Toyota-brand cars, trucks, and crossovers here, it has never manufactured Lexus vehicles in the U.S. That raises the question: why now?
For starters, we could look to the Japanese yen, which has been on a tear the past few years. At first glance, that might seem like a good thing for Japan, but the strong currency has made Japanese production costs soar and Japanese exports pricey. As a result, Toyota and many of its compatriots have been looking to move manufacturing out of the country.
Then, too, there's the strengthening U.S. economy and the booming auto market here. Since Toyota already has facilities in America, building Lexus vehicles closer to their point of sale is a smart way of streamlining production and distribution.
And of course, we can't ignore the goodies being doled out by the state of Kentucky. According to the Wall Street Journal, officials have granted Toyota $146.5 million in tax incentives in exchange for the expansion, which Toyota says will add 750 jobs to the local economy.
If the world's financial situation continues to improve, Toyota's plan will likely roll out right on target. But 2015 remains a couple of years away, and things could change dramatically by the time that Lexus production is slated to begin in the U.S. We'll keep you posted.