Toyota Motor Corp to spend $1.4 billion to build car factories in China

Toyota Motor Corp,the world's largest automaker, plans to spend around $1.4 billion to build factories in China and Mexico, ending a self-imposed freeze on new plants, following the global financial crisis.

Production of a model, yet to be named, is scheduled to start from 2017 in Guangzhou, China. The new factory in Mexico's state of Guanajuato would start rolling out Corolla cars in 2019.

''An increase in production does not mean an undisciplined pursuit of more,'' president Akio Toyoda, 58, said in a statement released in Tokyo. ''These investments will be an important test of Toyota's resolve and a measure of tangible improvement.''

Toyota had been hammered by the global economic slowdown just as it was expanding its line-up and had forayed into new markets, with Toyoda banning new plants for at least three years.

This led to Toyota facing an acute capacity constraint. Expansion in the years leading up to the global financial crisis had led to the company's first annual loss in 59 years in 2009 (See: Toyota posts $819 million Q1 loss, but anticipates upturn).

While Toyota is now expected to post a second-straight record annual profit, its position as No 1 in global sales is being challenged by Volkswagen AG.

Jim Lentz, chief executive officer of Toyota's operation in the region, told Bloomberg in a telephonic interview that a plant was sorely needed in North America.

The move would see the company join other automakers as they turned to Mexico to build and export vehicles.

The facility would employ 2,000 workers and produce up to 200,000 Corollas a year when it opened in 2019.

"We are thrilled to invest in North America so we can better meet the needs of our customers for decades to come," said Lentz.

As Toyota moved production of the Corolla south of the border, it would retool its plant in Cambridge, Ontario, where the Corolla was currently manufactured. The Canadian plant would then be transformed to build a midsize vehicle that had yet to be named.

Toyota's move to Mexico had been expected as the automaker last year indicated it would resume its global expansion after a three-year halt to adding new plants.

The pause in increased production capacity even as Volkswagen continued its global expansion was one reason why the German automaker had closed the gap in sales between itself and Toyota, the world's leading auto manufacturer.