Ford Motor Co. says it is dropping its plan to build a $1.6-billion US plant in Mexico, a plan criticized by Donald Trump during last year's presidential primary campaign.

Ford also announced it plans to invest about $700 million in a Michigan factory that will build high-tech autonomous and electric vehicles.

The company said it will add 700 direct new jobs at its Flat Rock (Michigan) Assembly Plant, which will build a small sport utility vehicle with extended battery range, a fully autonomous vehicle for ride-hailing or ride-sharing, and the Ford Mustang and Lincoln Continental.

In April, Ford revealed plans to build the plant in Mexico's San Luis Potosi state, with the goal of creating about 2,800 jobs and shifting small-car production out of the U.S.

Trump, who had criticized moving jobs from the U.S. to Mexico, called Ford's decision "an absolute disgrace." Trump also pledged he would rewrite the 1994 North American Free Trade Agreement (NAFTA), tax imports and punish U.S. companies, including Ford.

Ford chief executive Mark Fields said Tuesday the decision to cancel the Mexican plant was partly related to a need to "fully utilize capacity at existing facilities" as sales of small and medium-sized cars slide.

Speaking at the company's plant in Flat Rock, Mich., Fields spoke about Trump's vow to boost U.S. competitiveness by cutting taxes and easing regulations.

"This is a vote of confidence for president-elect Trump and some of the policies he may be pursuing," Fields said.

Additionally, Ford reiterated Tuesday that it would continue with its plan to build its new Focus small car at an existing plant in Hermosillo, Mexico, in order to boost company profitability.

Just a week after the U.S. presidential election in November that led to Trump's victory, Fields confirmed the company was pressing on with the plan for the Focus.

Citing an unnamed source, Reuters reported that the Trump team was told Tuesday morning about Ford's new plans. The news agency reported the source said the move was influenced by Trump's policy goals, but said there were no talks between the company and Trump about the decision to nix the Mexico plant or pump money into Michigan.

Following the company's announcement, Ford shares rose more than three per cent, closing at $12.59 US.

In related auto-sector news, Trump also lobbed a volley on Twitter at General Motors and threatened a "big border tax" for producing Chevrolet Cruze vehicles in Mexico.

"General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A. or pay big border tax!" Trump tweeted.

In defence, GM said all Chevrolet Cruze sedans sold in the U.S. are built in its assembly plant in Lordstown, Ohio.

The company sold approximately 190,000 Cruze vehicles in the U.S. last year, with about 185,000 of them the U.S.-made sedan. Only about 4,500 were the hatchback version built in Mexico.

"GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S," the automaker said in a statement on its website.

GM shares rose by 31 cents to end at $35 US.

So far, Trump has mainly focused on U.S. automakers and their Mexican production. The incoming U.S. leader hasn't really gone after the Canadian automotive industry, said Brendan Sweeney, project manager at McMaster University's Automotive Policy Research Centre.

Given how integrated the Canadian and U.S. auto sectors are, with parts and vehicles flowing across the border., perhaps Canada isn't a target, Sweeney said.

"If Trump were to impose a tariff on Canadian-made vehicles coming into the U.S., it would hit the U.S. consumer pretty hard," he told CBC News.