Toyota’s US president and CEO has said the automaker is considering moving some Lexus production – possibly the ES sedan – from Japan to the US because of the strength of the yen.
But Toyota Motor Sales USA’s Jim Lentz told Reuters that, due to the high cost of any such move, the company would have to monitor the market and the yen’s strength further before making any decision.
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“With where the yen is today, I think it’s only a matter of time” before Toyota moves more production to North America, particularly to the United States, to have assembly nearer to the US market, he said.
Lentz told Reuters that, in addition to the strong yen, moving production was “being driven” by engineering capabilities in the United States, including at Toyota’s engineering centre in Ann Arbor, Michigan, where over 1,100 engineers are employed.
Japan on Tuesday (7 August) said it would extend its dollar credit facility, aimed at helping companies invest overseas, by six months as part of its efforts to cope with the strong yen.
Lentz, speaking to Reuters at an industry conference in Traverse City, Michigan, also said Toyota was sticking to its forecast for industrywide US sales of 14.3m vehicles in 2012.
Currently, about 70% of the vehicles Toyota sells in North America are made there in plants in the US, Canada and Mexico. The Lexus RX is assembled in Ontario, Canada, where the Cambridge plant was the first outside Japan to build the brand.
Lentz said 70% is a good level but several factors were leading Toyota to consider raising it.
He said that, while Mexico was an option for more production, sending production to the US is more likely.
“We look at North American in toto but we do very little manufacturing in Mexico. We have one plant,” Lentz said.
He said US industry auto sales gained strength in the last quarter of 2011 and early 2012 but then stalled largely because of a lack of consumer confidence about taking out car loans.
Lentz said sales would not improve significantly until after the November presidential election. Once the election is over, retail would will increase, regardless of which candidate wins, because there would be more certainty on the course the federal government takes on the economy, Reuters reported.
While the European financial crisis may have an impact on US consumers psychologically, Lentz said problems in Europe would not hit US auto sales significantly.
Toyota’s incentives for auto buyers are among the lowest in the industry, but the company is considering adding incentives in the luxury market, he said.
Lentz said he expected the recent surge in subprime lending, which offers consumers with lower credit scores the chance to get a car loan, to continue into the new future.
“The biggest change in lending today is more and more banks are getting involved. That’s a big change,” he said.
Across the auto industry, banks are become more active in making car loans, which “means banks have a lot of money to lend and don’t want to be in the housing market,” he said. “There is profit to be made on the car side.”
“It’s not nearly what it was when the Great Recession hit,” he said.
In addition to easier credit, Lentz told Reuters new vehicle sales would rise in the next few years because the average age of the 240m or so cars on US roads is nearly 11 years. He said another factor was slower production from 2008 to 2010, which means a low stock of vehicles less than five years old; such vehicles compete with new vehicles for consumers’ attention.
