Is the U.S. Toyota's new export hub?

Posted by: Ian Rowley on May 20, 2008

After years of building U.S. factories to build Toyotas for American customers, reports in Japan today say the giant automaker will soon export vehicles from the U.S. to the Middle East.

The reports claim Toyota will begin shipping Sequoia SUVs to the Middle East later this year. If the sluggish U.S. auto market fails to recover from current difficulties—analysts reckon industry sales may fall to as low as 15 million vehicles this year—Toyota may also consider sending Sienna minivans to China from 2010. Toyota declined to confirm or deny it has plans to export from the U.S.

What is clear, though, is that Toyota like just about all automakers faces a challenging time in the U.S. Today’s news follows confirmation by Toyota on May 12 that it will delay opening a new $1.3 billion Highlander plant in Mississippi, by five months due to concerns over the U.S economy. The plant, which will be Toyota’s seventh in North America, is now slated to crank up production in spring 2010.

In the meantime, selling Indiana-built Sequoias to customers in the Middle East looks smart. While sales of big vehicles like the Sequoia are wobbling in the U.S., auto demand from oil rich Middle Eastern nations and emerging markets such as China and Brazil remains strong. That’s one reason why Japan’s car companies, despite projecting profit declines this year, posted increased sales in the recently ended financial year. Last year Toyota sold more vehicles in the Middle East than it did in China.

It also enables Toyota to maintain production levels at U.S. plants, which are affected by the downturn. At its plants in Indiana and Texas production has already slowed, leaving employees to spend more time on training or plant improvements (Toyota has no plans for layoffs).

Then there’s the currency issue. Ironically for Toyota, which like most Japanese car makers has long been criticized for benefiting from the weak yen, exporting from the U.S. will enable it to cash in on the weak dollar, which has slumped 15%-20% against the yen in the last year. With the greenback weak, shipping Sequoias from the U.S. sounds like a profitable business. Indeed, according to Chris Richter, an analyst at broker CLSA here in Tokyo, margins on the U.S. built Sequoia are likely to be close to those on the Japan-made Land Cruiser.

Reader Comments

NOZ

May 20, 2008 12:04 PM

Oh Boy! I can just about hear the numble-minded boosters of the Detroit Failing Three screaming over this one. "Snookered again by them thar danged ferners!"

But, you micro-brained bigots, remember that the Sequoia plant is staffed with--guess what? Americans. Not UAW members, but REAL Americans. So bitch and whine all you want, dredge up all the olde brotherhood/solidarity and 'All for us/us for us/to hell with them' garbage from the past. You and your UAW drove you down this dark road in Failing Three-branded vehicles, many made in Canada and Mexico. The pathway to oblivion was lighted by cheap fuel feeding the flames of greed in the furnaces of GM, Ford, and Chrysler--Wagoner/Lutz, Billy-Bob, and now that three-headed dog.

Didn't know that the pickle biz was a part of the car/truck biz? Well, wake up and smell the stench of vinegar.

I have to add that you timid little lambs are indirectly (ir) responsible for the 'high' fuel costs these days, and that they do not exist in the Middle East to the same extent as here for a variety of reasons.

I might also say that the Middle East customers prefer the Toyota vehicles to those unreliable FT Detroit-designed hulks cobbled together here.

Carlie Kollath

May 20, 2008 4:56 PM

Very interesting news.

And fyi, I'm a business reporter at the Northeast Mississippi Daily Journal and we first reported the Highlander plant delay on May 3. Our story included confirmation from Toyota execs. Not sure why it took Reuters so long to pick up on it.

Here's the link to the original story:
http://www.djournal.com/pages/archive.asp?ID=272732&pub=1&div=News

We also cover the local Toyota news on our blog: http://tupelobizbuzz.wordpress.com/

Granted, it's nowhere near as comprehensive as The Auto Beat, but we have fun with it.

5watt

May 21, 2008 8:23 AM

Noz you need to get off your soap box and just go away. Detroit has been selling big trucks to rich oil countries for a while now. It begs the question of what took Toyota so long to figure it out? Although good news I don’t expect if to make a significant dent in the 45% of Toyota sales that are imported to NA.

ballbuster

May 21, 2008 11:04 AM

Majority of Brazil's car run on ethanol not on crude; China has fuel shortages because of communist's price control; Iran has no refinery but sells high price crude to subsidize gasoline to the tune of 75%; majority of middle-east countries do not have refinery capacity(as one exception, Saudi Arabia does have refinery capacity). Basically, to appease their masses and hold on to power, the middle-east dictators sell high price crude to the west to pay for the gasoline refined at Romania that's given almost free to their people. Rowley implies that people of the oil rich middle-east can afford to drive big SUV because they live above a huge under-ground oasis of crude. That is not true. When and if crude prices retreat to even $50/barrel, these countries will be hard press to continue subsidizing gasoline and hence, any sales and operation of SUV will die. The current "party" atmosphere in the middle-east will end when the oil speculation frenzy ends and that means sales of gas guzzler SUV will also end. For example, Amanjandine(sic), the dictator of Iran, is uniquely vulnerable to this gasoline and politic connection. Hence, his rhetoric about nuke bombs, anti-USA, and crude supply disruption are ploys to feed oil speculators of Wall St. Sucker Rowley swallowed the whole bait and sinker on this one.

DC

May 21, 2008 4:14 PM

ballbuster, the oil price will never ever return to $50 per barrel. The era of cheap energy is over. Period.

hsaid

May 21, 2008 10:33 PM

To ballbuster,

I can see Mr.ballbuster totally misinformed about the Middle East. The US is yesterday world power with falling currency that requires them to borrow 1 billion on every sunrise to fuel their killing machine as well unsustainable consumption fuelled by greed in Wall Street.

Rising oil prices, has nothing to do with politics, it is pure business and money. Why you pay nearly $1 for 1 litre of bottled water you don't cry, but when government taxes makes around half of the price you pay on the pump you blame another party.

I wonder if Mr.ballbuster tried to contact his congress representative to pressure the government to lower the fuel taxes, or he may try to give up his V8 car.

Please be assured that refineries in the Mid East have enough capacity for their own consumption. What about the US that stopped building refineries since Mid 1970's.

I guess Mr.ballbuster comes form red state who read/watch nothing but right wing media.

NOZ

May 21, 2008 11:26 PM

Swatt,

Check out the numbers. Detroit is not much of a player, but yes, the Middle East is the other location of sales of our failing/flailing whales.

In terms of going away, after you pal.

ballbuster

May 24, 2008 4:11 AM

Perhaps I've ignited a small fire at BW. For an illuminating and contemporary article on Venesuela's gasoline subsidy and politic, see the link below:
http://www.businessweek.com/bwdaily/dnflash/content/may2008/db20080523_344156.htm?chan=top+news_top+news+index_news+%2B+analysis

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