Toyota to make RAV4 in plant that lost Corolla production

Toyota Motor Co. has announced it will produce the RAV4 sport utility vehicle , including its hybrid version, at its plant in Cambridge, Ont., beginning in 2019.

That's the same plant that earlier this year learned it had lost production of the Corolla to a plant in Mexico.

• Toyota moving Corolla production to Mexico from Ontario
• Loss of Corolla doesn't have to be lethal blow for Canadian auto production

Toyota announced Tuesday that its Cambridge and Woodstock, Ont., plants would be a North American hub for sport utility vehicles, with the Lexus RX made in Cambridge and the RAV4 in Woodstock and Cambridge.

The Cambridge North plant was rated the best quality auto plant in North America by J.D. Power earlier this year, based on its low number of defects per vehicle.

Toyota said it would make "significant new investment," but did not give a dollar figure. It also did not reveal how many people would remain employed at the plant.

Toyota currently employs 8,000 people at three plants in the Cambridge area and has given assurances that employment will be maintained, according to company spokeswoman Suzanne Baal.

Toyota said production of the Corolla would end in 2019, with RAV4 production to begin the same year.

The RAV4 is the most popular cross-over SUV sold in Canada. More than 220,000 of the vehicles are currently made each year at its Woodstock plant, the newest of three plants Toyota has in Ontario.

But that production doesn't meet North American demand, Baal said. Sales of the RAV4 in the U.S. alone exceeded 260,000 last year. "This is a hugely growing segment of the market," Baal said.

The company is rolling out a new production process across its global operations and will begin that process in Canada with the Cambridge North plant. The new process involves designing vehicles with standard parts, working toward high fuel efficiency and improving quality across the production process.

Baal said there would be increased demand for parts from suppliers who currently contribute to production of the RAV4.

Toyota's announcement that it would move production of the Corolla to Mexico added to concern about the competitiveness of the Canadian auto industry. 

Canadian share of auto making shrinks

There is a fear that auto assemblers will pull out of Canada to shift production to lower-wage jurisdictions such as Mexico, leading to the loss of thousands of jobs.

Canadian share of North American light-vehicle production has fallen to 12.6 per cent in 2015, according to DesRosiers Automotive Consultants. That's down from 17 per cent in 2007. At the same time, Mexico has taken a greater share of production, now at 19.5 per cent of North American automotive output.

Scotiabank economist Carlos Gomes says the RAV4 is a higher value-added product than the Corolla and the addition of a hybrid version improves the capacity of the Cambridge operation.

He also welcomed the news that Toyota would retool the plant, as new investment in the Canadian auto sector has been waning.

Demand for vehicles strong

"The reality is when you're looking at demand for vehicles, especially in the U.S., sales are back where they were in the early 2000s," Gomes told CBC News. And many of the vehicles currently on the roads are due for replacement, meaning strong demand will continue.

Gomes said the North American auto sector is "ahead of the curve" in adapting to the higher-value, higher quality manufacturing that consumers demand.

He's optimistic that the Canadian industry will remain competitive, even after adoption of the Trans-Pacific Partnership.

"Under NAFTA, the parts requirement was 60 per cent, but it actually is at 76 per cent right now, significantly above that threshold," he said.

The TPP reduces the requirement for North American-made parts, but Gomes says that may not matter as the North American industry has developed a tight supply chain that works.