Toyota Tundra Production Capacity Could Grow – Chicken Tax Update
Tim Esterdahl | Apr 23, 2014 | Comments 12
The Trans-Pacific Partnership talks are heating up and the Chicken Tax is a big part of the negotiations. If the tax is dropped, could Toyota shift Tacoma production to Japan and increase the Tundra truck production capacity? This is just one of many possibilities.
Toyota has a production capacity issue in Texas. If the Chicken Tax is dropped, they could shift Tacoma production and vastly grow the Tundra’s production.
Chances are over the past several years, you have heard us or others talk about the Chicken Tax. This 25 percent tariff on light trucks has kept quite a few compact trucks out of the U.S. It has also done a great job of insulating GM, Ford and Ram from world wide competition in North America. What does the Chicken Tax have to do with the Trans-Pacific Partnership? A lot. The tax is a key item in the ongoing negotiations.
This week, President Obama is planning on making a visit to Japan. During his visit, President Obama is expected to press Japan on the terms of the TPP. Leading up to his visit, negotiators have been tirelessly working to close the gap between the parties. The gap is currently between agricultural products and the Chicken Tax.
The TPP is a 12-member nation trading pact containing: Australia, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. These countries control 40 percent of the world’s economy. Negotiators have said they want to wrap up the agreement by year’s end and have been working to get this completed. President Obama is also pushing to get a deal done. While you may agree with or disagree on the idea of the trade pact, the reality is if the TPP is adopted with the exclusion of the Chicken Tax, the North American truck market and the world is in for a radical change.
A Chicken Tax Free Pact
While there is a lot of speculation on what will happen, the truth is many manufactures like Toyota could shift production of certain vehicles overseas to expand manufacturing capacity in the U.S. It may also lead to the rebirth of the Australian car market and Ford, GM could build factories that would export products to the U.S.
This isn’t a big leap and has happened in the past. You may recall that several GM, Ram and Ford products have been built in Mexico and Canada. The North American Free Trade Act has a chicken tax exclusion. A similar exclusion in the TPP would do the same thing.
What about Toyota? Remember the production capacity problem they say they have in San Antonio? That problem could go away with Toyota looking to build the Tacoma in Japan. They could develop a shared platform and parts for the trucks and simply use different exterior styling and a new dash for U.S. models. This would allow them to significantly expand the options for the Tundra with more room to build the truck.
Chicken Tax’s Future in Doubt
With NAFTA excluding the Chicken Tax and now the TPP doing the same, the tax’s future may be in doubt. The tax, a “policy in search of a rationale,” according to a 2003 CATO Institute study, has been targeted by several companies as an obstacle.
VW has been making noise for months now about their Amarok. If the Chicken Tax were dropped, the business case for importing a VW truck is much better. VW has said so thing many times. Although, recently VW executives have said they don’t believe they could build and import a full-size truck. The additional R&D and engineering costs make it too difficult. This doesn’t mean they wouldn’t try to develop a smaller Amarok to import. VW has said they don’t think the Amarok’s size fits into the U.S. market (think T-100).
Also, Scion may finally build a compact truck. Tim had the opportunity to talk with Scion Vice President Doug Murtha at the 2014 New York International Auto Show. He said the problem is two-fold. One is the Chicken Tax and the second is scale. In order to be profitable, Scion would need to scale production to 100k units, Murtha said. We think that by using a common platform and selling the truck globally, it makes the 100k threshold easier to meet. Toyota is planning on investing a lot into Scion with three new vehicles planned on being revealed at the 2014 Los Angeles show. A pickup is not so outlandish.
The facts are the CAFE regulations have been grabbing a lot of people’s attention. However, the TPP could easily overshadow the CAFE requirements and be the biggest thing to happen to the North American truck market in decades.
What do you think? If the Chicken Tax is excluded, do you see an onslaught of small, compact truck imports?
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Filed Under: Auto News
yes, I do! I think the US market could use a better segment of compact trucks. The Tacoma will still dominate our market, but it could have a overall good impact on the industry.
The “chicken tax” was well intentioned, but has outgrown its usefulness in today’s global economy. My truck is a product of that system.
My Toyota truck was mostly built in Japan, and the bed was built and added in Long Beach, CA.
It’s strange in the modern era, that imports are built in the United States, and domestic brands are built in Canada and Mexico.
As a side note, the cab on my ’85 pickup is bone stock. The “Long Beach” bed rusted out long ago, and had to be replaced. Just saying.
Could we actually have “Tundra Unleashed”?
Will they, could they, will it be “allowed” to have a major increase in Tundra production?
Would Tundra be offered with upgrade packages for Limited and SR5? That could yield increased sales of 10-15% alone.
Would Tundra be offered in just two additional paint choices, like 4 layer Diamond White Pearl Metallic Clearcoat, or 4 layer Ruby Red Metallic Clearcoat offered on Lexus with the “self-healing” clearcoat. Paint choices like that would boost sales by 10-15%, essentially no engineering or tooling required. Both Ford and GM have used this “trick” for years to boost sales significantly and that is even with lower quality painting systems. There are a lot of potential buyers out there that will pay extra for a “real 4 layer Lexus” paint job.
Even Toyota admits they have been surprised by the success of the Platinum and 1794. Well that success is all based on “content” and the buyers “know it”; because that is what they want.
Will Tundra be allowed to have the minor missing things that would add another 10-15% in sales? Dual 12 way power seats, load flat, keypad, USB stick holder and coffee cup holder that can be used at the “same time”? (and a dozen other little things completely overlooked – things that do not cost money)
Of course the only way Tundra could have can accommodate a 50% increase in sales is to move the Tacoma production someplace else.
What a concept – Tundra Unleashed
Randy,
It is interesting that all the talk about luxury trucks selling like crazy and automakers not sure what the ceiling is, that someone doesn’t go “all in.” I mean, throw everything into a package and offer the most fully loaded truck ever. That would be something to see. A true luxury pickup.
-Tim
Well … Lexus has the engine for it so maybe they should put all that stuff in a Crewmax and use the Lexus or Land Cruiser interior.
You’re right. It seems pretty easy for Lexus to bring a truck to the market. I don’t know that they will, but with the average truck transaction price growing, it might be something for them in the future.
-Tim
I watched NHK Tokyo News last night. More than half of the program was devoted to the US President and Japan President and their discussions regarding Hogs, Chickens, and Automobiles and how new agreements will be hammered out with revisions to the Trans Pacific Partnership. The way I understand it our President wants increased tariffs on automobiles from the “east” but that he will not make his decision until after the mid-term elections.
So the fundamental question remains will Toyota be “allowed” to build more trucks for the USA?
I say to heck with it all. Just build another plant for production of Tacoma’s in Texas. That way when we succeed from the union we will have everything we need here to prosper. Then and only then will we get all the Tacoma’s and Tundra’s we want and need.
Randy,
That is pretty interesting. I wonder why Obama wants an increased tariff. I can see protecting U.S. automobile manufacturing, but they are just skirting the law anyways.
It will be really interesting to see how this all folds out. Like I said, it could have a larger impact than CAFE regulations.
-Tim
Tim
Protection for U.S. automobile manufacturing,,,,,, I don’t think we really want to go that way.
Protection for the company which built my RAM in Mexico? The US is never going to be able to climb out of this hole. It’s time to compete or die.
Toyota is in a great spot and will continue to grow.
A Lexus luxury truck, now that’s an idea. I would just love to bury one of those up to the doors in the mud.
[…] could decide to move production of the Tacoma to Japan. This would free up capacity for them to expand their Tundra production – the more profitable truck. Also, the Tacoma could share a platform with the Hi-Lux that would […]
Tim,
Thanks for posting the link to your article, it explains even more.
Now after watching the NHK News the other night; I was actually getting the impression that keeping he chicken tax in place (or increasing) for Asian producers of trucks but eliminating them for the EU could be a possibility.
I want to be clear they did “not” say that, it was the impression I got and hence we have all the “delays” in arriving at a solution to the Chicken Tax nightmare.
They only part the news commentator did say is that the decision on the “tariffs” will be put off until “after” the US mid-term elections.
The NHK News people just like in the USA can be very artistic and creative in their presentations and yet still factual, at least to a point.
Speaking of the Hi-Lux have you noticed in all the “war scenes” on the TV News, all the “warriors” are now replacing their Tacoma’s with Hi-Lux’s?
Randy