Toyota Motor Corp. plans to build engines and small hybrid cars in the Tohoku region as the company strengthens its production hub in the area.
The automaker, the world’s largest maker of gasoline-electric vehicles, will start making small hybrid models at affiliate Kanto Auto Works Ltd.’s plant in Iwate Prefecture, Executive Vice President Atsushi Niimi told reporters Tuesday in Sendai.
Toyota will also spend ¥2 billion to build a factory at affiliate Toyota Motor Tohoku with capacity to make 100,000 engines a year, he said.
Toyota is making the Tohoku region its third domestic production hub after Aichi Prefecture and Kyushu.
A government study in May showed an 87 percent likelihood of an 8-magnitude earthquake striking the Tokai region, where Toyota is based, within 30 years.
“To diversify against the risk of a possible earthquake in the Tokai region, it makes sense for Toyota to invest in Tohoku,” said Kohei Takahashi, an auto analyst at JPMorgan Chase & Co. in Tokyo, who has a “neutral” rating on Toyota shares.
The company’s new plant in Miyagi Prefecture started building Yaris compacts in January and Corolla compacts in May.
Kanto Auto Works will play a “central role” in small-hybrid production, Niimi said.
Toyota is trying to improve the profitability of its domestic operations as a strengthened yen erodes export earnings. The carmaker built 43 percent of its vehicles in Japan last year, compared with less than 30 percent at both Honda Motor Co. and Nissan Motor Co., its two closest domestic rivals.
As Toyota introduces new and more efficient production techniques in Tohoku, it will eventually scrap some antiquated factory lines in Aichi, Niimi said last week. The company is also making Kanto Auto Works and Toyota Auto Body Co. wholly owned subsidiaries.
“By merging its subsidiaries, Toyota will be able to better control its output level in Japan, and this is probably how Toyota will aim to maintain Japan production even with the strong yen,” JPMorgan’s Takahashi said.
Toyota aims to maintain output of 3 million vehicles a year in Japan and to be profitable at an exchange rate of ¥80 to the dollar, Niimi said.
Showa Denko boost
Showa Denko K.K. said Tuesday it will expand production capacity for materials used in lithium-ion rechargeable batteries at three plants in Japan by 2012.
The major chemical manufacturer decided on the move because demand for materials for the batteries, used in automobiles and other industrial and household applications, is expected to grow rapidly.
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