Is Toyota Readying for a Truck Explosion?

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Is Toyota Readying for a Truck Explosion?

Big changes are coming for Toyota’s truck lineup.

A small, overlooked item in the recent news of a Toyota and Mazda partnership was that a planned plant in Mexico will not build more Toyota cars, but instead will build more Toyota pickups. This, along with a new joint plant shaking up production in current facilities, are big deals for truck fans and could foreshadow a coming truck explosion from Toyota. Here’s why:

The Mazda and Toyota partnership announced on August 4 will result in Toyota’s new plant, which is under construction in Guanajuato, Mexico, producing Tacomas instead of Corolla compact cars, expanding truck production by 200,000 units.

Also, Toyota fans should recall that the Baja, Mexico, facility that will be online later this year or early next, will add another 90-100,000 Tacoma units produced annually.

This explosion in capacity totaling some 300,000 units annually should result in quite a few shakeups of Toyota’s current production plans.

Is Toyota Readying for a Truck Explosion?

Current Demand and Production

For years, the conservative car maker has leaned on its small car lineup, and while that won’t be changing anytime soon, the growth in capacity for trucks is a welcome addition. Toyota’s only current truck plant in San Antonio, Texas, has been running non-stop for the past few years with a Saturday flex shift. This wear and tear on the machines and workforce to keep pace will pay a toll eventually. Yet, Toyota still can’t meet demand.

“San Antonio just hired 300 workers they are putting on the line and once that is up and running, it will mean another 12,000 pickups for the rest of the year,” Bill Fay, group VP and GM of the Toyota division at Toyota Motor Sales, told Truck Trend two years ago. “That’s probably still not enough. We continue to work with our manufacturing partners to do whatever we can to meet consumer demand.”

He also mentioned at the time that Toyota felt it was short of filling supply by 20 percent. Grabbing our calculators, we see last year that Toyota sold a little over 300,000 Tacoma and Tundra pickups. Twenty percent more of that number would be 360,000 units, which leaves an excess capacity of 190,000 units.

Finally, Tundra sales have always been dependent on the product mix coming out of San Antonio, Texas. Dealers have asked for more trucks for years, including the Tundra.

“If you were to ask any of our U.S. dealers what they want, I’d say every one of them would say ’More trucks,’” Bob Carter, senior vice president for U.S. Toyota operations told Reuters back in late 2015.

Things haven’t changed with the truck market continuing to be on fire and dealers still demanding more Toyota pickups.

Toyota Tacoma

Changes in Production Strategy Coming

Further setting the stage for a massive change in strategy is the fact the global car market is drying up with consumers now demanding more trucks and SUVs. All automakers are making changes to adjust to consumer demand and it seems like everyday we have new spy photos of upcoming products like the Jeep Wrangler pickup and Ford Ranger. Also, a new Ford Bronco and Chevy Blazer are moving closer to being unveiled. These new products directly impact Toyota since its stalwart truck offerings — the Tacoma and the 4Runner — are now under siege more than ever.

It is very likely then Toyota would be looking to not only increase the Tacoma production, but also key SUVs like the 4Runner and Highlander. We also hear a rumor the poor sales of the Sequoia are wearing on management and it could be coming to an end.

This could mean: the Sequoia is killed off and the Highlander (up 20 percent last year) expands to fill the void. Also, the Tacoma’s expansion in Mexico means it would have to leave the San Antonio, Texas plant leaving a void alongside the Tundra production. A natural fit here would be to bring some of the production of the 4Runner over from Japan to fill this void. The 4Runner sold 111k units last year in the U.S., while the Tacoma sold nearly 192,000. This would nearly fill up the plant’s capacity with an increase in Tundra production absorbing the room.

It is likely the Japan’s production facility could easily fill the void in 4Runner production by simply building more units for global markets.

Then, there is the Tacoma that is going to see its production ceiling raise to 300,000 units. With the expected growth in the mid-size segment and the truck already not meeting demand with 192,000 units sold, there seems to be just the right amount of production capacity for it.

Is Toyota Readying for a Truck Explosion?

Future Product in the Works? Diesel Tundra and Tacoma Pickups

While the above section neatly lays out what conservative Toyota will likely do to absorb the increase in production capacity by simply shifting production to meet demand, where is the fun in that? What could they do with this production capacity boom instead? One word: diesel.

For years Toyota fans have clamored for a diesel engine option in both the Tacoma and Tundra (heck even the 4Runner to some degree). While chief engineer Mike Sweers has painstakingly pointed out time and time again three main obstacles are in the way:

  1. The $2,500-3,000 price hike to cover costly emissions equipment
  2. Production capacity was tapped out
  3. Upcoming EPA regulations will further make diesel engines cost prohibitive

These obstacles made sense a few years ago, but times have changed.

Starting with the price hike, consumers are paying for it without reservation. Exhibit A is the Ram 1500 EcoDiesel with its price premium. Consumers have bought that truck so much, it consistently ranks in the double digits among ALL Ram pickup sales including heavy duty models. Also, Ford is expected to bring out a F-150 diesel in the Spring of 2018 and there are rumors Chevrolet/GMC will do the same with its new trucks next year. Chevy/GMC are even going to offer small diesel engines in their lineup of SUVs as well.

Production capacity had been tapped out for years this is true. However, new changes in production, as detailed above, remove that obstacle. Toyota could have around 70k units in San Antonio to play with and adding a diesel half-ton Tundra to the fold could help soak up this capacity.

It is also true future EPA regulations are set to continue to make life tough on small displacement diesel engines. However, that was before the new administration took office and is now re-examining their fuel economy standards. Changing up those standards to be less forgiving would allow manufactures more room to play with other fuel sources beyond electric cars – which arguably consumers haven’t flocked to. Instead, adding a diesel engine with its 20 percent increase in fuel economy out of the box and profit margin for truck makers, could see more manufactures like conservative Toyota finally give it a go.

While this is all speculation, the argument against a diesel Tundra, Tacoma or 4Runner is not as strong as it once was. Diesel engines are gaining traction in the U.S. that is a fact and one Toyota would be leery to ignore in their future production plans.

What do you think will happen? Sound off in the forums!

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