A Lexus NX300 is shown at the Toyota Motor Manufacturing Canada plant in Cambridge, Ont.Geoff Robins/The Canadian Press
Toyota Motor Manufacturing Canada says it will make two more Lexus SUVs in Ontario, providing a welcome boost for the province’s battered auto sector.
The Japanese automaker said Monday the Lexus NX and NX hybrid luxury SUVs will begin rolling off the assembly lines at one of its two plants in Cambridge, Ont., southwest of Toronto, in 2022.
The announcement follows last year’s move by Toyota to spend $1.4-billion at its Ontario plants to build a new vehicle platform, supporting existing jobs and creating 1,000 co-op placements. The investment included $220-million in federal and provincial grants.
Dennis DesRosiers, of DesRosiers Automotive Consultants, called Toyota’s choice of vehicles for the plant “brilliant,” observing that the fastest-growing auto segments in North America are luxury vehicles and hybrids.
Both classes of vehicle have high profit margins, he said – another reason they are a good fit for the Cambridge plant. “A high margin is important because of the cost structure in Ontario,” Mr. DesRosiers said in an interview, referring to the province’s high electricity and regulatory costs.
Toyota is moving production of the popular Corolla sedan out of Cambridge to a plant in Mississippi and later to a new factory in Alabama. The RAV4 compact SUV, which is made at its factory in Woodstock, Ont., will replace the Corolla in Cambridge.
Mr. DesRosiers said the Corolla move gives Toyota spare capacity in Ontario. “It’s extremely expensive to put new capacity in place. It’s much more affordable to use existing capacity, and I think that’s at the root of it.”
Toyota employs 8,500 people at its three Ontario plants. One of the Cambridge plants also makes the Lexus RX 350 and Lexus RX 450h luxury SUVs. The plant produced its first Corolla in 1988 and in 2000 became the first factory outside Japan to make Lexus cars.
Scott MacKenzie, manager of external affairs for Toyota, said the new Lexus vehicles will be made on existing assembly lines and that a decision has not been made on which Cambridge factory will produce them. No new jobs will be created, he said, denying the company has spare capacity.
“We’re basically full-out making RAV4 at our [Cambridge] and [Woodstock] plants but we did want to have another vehicle in our lineup,” Mr. MacKenzie said by phone.
Monday’s announcement means Ontario produces the two top-selling Lexus models for the North American market.
“We feel we can manufacture successfully and competitively in Canada and have done always that and we intend to continue doing that,” Mr. MacKenzie said. “When we started making Lexus RX back in 2003 … we were the first and at the time only plants outside of Japan chosen to make Lexus. … A lot of that is based on trust.”
The announcement is a rare bit of good news for the Canadian auto industry.
General Motors Co. will close its Oshawa car plant in December, putting about 3,000 people out of work as it pulls the Chevrolet Impala and Cadillac XTS from its lineup. Fiat Chrysler Automobiles NV said it will cut a shift at its Windsor, Ont., factory starting Sept. 30, a move that will eliminate 1,500 jobs.
Canadian car and truck production dropped to less than two million units in 2018 – a level it first topped in 1993 – as the country’s share of North American output fell to 12 per cent, according to a recent report from DesRosiers Automotive Consultants. Production hit almost three million cars and trucks in 1999 and, except for a drop during the financial crisis of 2009, remained above two-million mark until last year.
DesRosiers said in a report that Canada has borne most of the North American production cuts. North American output fell 1.5 per cent between 2017 and 2018, but Canadian production declined 8 per cent in the same period.