As Trump targets Toyota over Mexico, Nissan faces bigger risk

Fri Jan 6, 2017 2:32pm EST
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By Naomi Tajitsu

TOKYO (Reuters) - U.S. President-elect Donald Trump has threatened Toyota Motor Corp (7203.T: Quote) over its Mexican-built cars, but the biggest risk from a punitive tariff would be for its compatriot Nissan Motor Co (7201.T: Quote), the largest automaker operating in the country.

Trump has criticized U.S. companies like General Motors G.N and Ford Motor Co (F.N: Quote) which manufacture abroad, accusing them of costing U.S. jobs. On Thursday he took on Toyota, warning the world's largest automaker that it would face a "big border tax" if it exported Mexico-built cars to the U.S. market.

But it is Nissan, Japan's second-largest automaker, which would be the bigger victim of any tax punishment. Nissan built its first overseas plant in Mexico in 50 years ago and now produces more than 800,000 cars there, mainly its entry-level Versa and Sentra sedans.

Nissan's production dwarfs that of Toyota, Honda Motor Co (7267.T: Quote) and Mazda Motor Corp (7261.T: Quote) in Mexico. It exports roughly half of its output to the United States, where it also has production plants.

Vehicles made in Mexico comprise roughly one-quarter of Nissan's total U.S. vehicle sales, industry experts say, compared with around 30 percent for smaller rival Mazda, but less than 10 percent for Toyota and Honda.

Japanese automakers together produced around 1.4 million vehicles in Mexico in the year ended March, nearly 40 percent of the country's total output. According to the Japan External Trade Organization, they plan to ramp up production to 1.9 million by 2019.

Current production in Mexico is dwarfed by the number of cars they produce in the United States, their single largest market, where Japan's top three automakers alone produced around 4 million vehicles in 2015.

Trump has said he plans to renegotiate the North American Free Trade Agreement between the United States, Canada and Mexico, and has vowed to impose a 35 percent tariff on cars exported to the United States from Mexico.   Continued...

Employees work at a production line before the opening of Nissan's new plant in Aguascalientes, Mexico. November 12, 2013. REUTERS/Henry Romero