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US Kluger for Australia

Origins: The next-generation Toyota Kluger (current model pictured) will be sourced from the US for the Australian market, seemingly ending any chance of local production.

Toyota to source Kluger from US instead of Japan, ending chances of local production

14 Feb 2012

TOYOTA Australia’s next-generation Kluger will be produced in North America from late next year, ending any chance of it being manufactured at Altona alongside the Camry and Aurion until at least next decade.

Last week’s announcement, which eliminates the mid-size SUV as an option in Toyota Australia’s decade-old desire to add a third model line at its Victorian facility, follows the cessation of Kluger production next year in Japan, where Australia’s current model is built.

As GoAuto revealed exclusively in January 2009, to guarantee continued local availability of the third-generation Kluger, due around 2013, Toyota Australia would have had to either build the vehicle itself or secure right-hand drive production from China or the US.

Toyota last week confirmed it would do the latter, by increasing production of the Highlander – as the Kluger is known in the US – at its Princeton plant from late 2013, following a $US400 million ($A373m) investment and the addition of 400 jobs at Toyota Motor Manufacturing Indiana (TMMI) to satisfy export markets including Australia and Russia.

“The company will invest about $400 million to support global demand for the Highlander, which will no longer be built in Japan by late 2013,” said Toyota Motor Corporation.

8 center imageLeft: Toyota Australia chief Max Yasuda. Below: RAV4, Corolla, Camry and the Altona plant.

“Toyota builds Highlander in China for that market only. Annual Highlander production volume is expected to increase by approximately 50,000 units at TMMI.

“Highlander is currently sold in Russia and Australia, and TMMI will export to those countries.” Toyota Australia would not comment on the announcement’s impact, if any, on its hopes to add a third model line at Altona – which date back to 2003 – instead saying that its first priority was to shore up the viability of its Victorian manufacturing operations.

Last month Toyota Australia announced it would cut 350 jobs in response to “current operating conditions”, including a slump in exports to the Middle East, the strong Australian currency and the global financial crisis.

Toyota Australia public affairs manager Glenn Campbell told GoAuto that Toyota Australia had from time to time studied the opportunity to add a new model to the production line-up at the Altona plant.

“These studies are internal and are a normal part of the long-term planning process,” he said.

“Toyota Australia’s current priority is to improve the cost competitiveness and efficiency at the Altona plant.

“We are unable to speculate on future product offerings. Kluger is one of many vehicle options that could be considered if a new model was introduced at the Altona plant.

“We are unable to provide detail on product plans, as we do not speculate on future product offerings.” Earlier this month Toyota Australia chief Max Yasuda told The Financial Review it could consider building a small car if it could establish that Holden had made a successful business case for local production of the Cruze small car.

“I have to find out how Holden is making the business of small cars feasible. If they can do it, we can too,” Mr Yasuda told the AFR.

Holden confirmed in late 2008 that it would produce the Cruze alongside the Commodore in Adelaide, after Ford had backflipped on a similar plan to produce the Focus in Broadmeadows and instead invested in the Falcon and Territory.

Both strategies involved financial support from the federal government and Toyota told GoAuto at last year’s Melbourne motor show that its own third model line discussions continued at a “primitive” stage despite the demise of the Australian government’s Green Car Innovation Fund.

“I’m asking our sales and marketing people to really understand the market trend in Australia … and based upon this study I think we can come up with some idea about which model we should produce here,” Mr Yasuda told GoAuto last July.

Toyota Australia has always said that if it produced a third model at its Victorian plant it would be based on the Toyota Modular Platform (TMP) or ‘MC’ chassis architecture that underpins the Camry and Aurion, meaning that in theory it could assemble anything from the Kluger, Venza, RAV4 and Lexus RX SUVs, to small cars including the Corolla, Prius or even the Lexus CT200h.

With the final nail placed in the coffin of Toyota Australia’s original plan to manufacture the Kluger here – revealed by GoAuto in 2003 – next-generation versions of the Corolla and RAV4 remain the most likely prospects for production at Altona.

Both models are due for renewal (the MkIII RAV4 was released here in February 2006, while the Mk10 Corolla arrived in May 2007) and both will be based on variations of the new Mk7 Camry’s latest TMP underpinnings.

Last year Toyota sold more than 36,000 Corollas (down 13 per cent), a model that has been usurped by the Mazda3 as Australia’s top-selling small car but remains Toyota’s most popular model both here and worldwide. The booming small car market accounted for almost a quarter of the million-plus vehicles sold in Australia last year, and has long eclipsed large cars as the nation’s biggest single sales segment.

If Toyota produced the Corolla at Altona it would not be the first time. The iconic Japanese nameplate was built in Australia from the late 1960s at Port Melbourne, later switching to the Holden plant at Dandenong under the ill-fated joint venture before becoming the first model manufactured at Toyota’s current Altona plant in the 1990s.

The RAV4, meantime, attracted more than 13,000 compact SUV buyers (down 10 per cent) in Australia’s fastest growing segment, making it Toyota’s fifth best seller here behind the Corolla, HiLux, Camry and Yaris.

Unlike the Corolla, however, the next RAV4 will be powered by the latest Camry’s 2.5-litre four-cylinder petrol engine, which will be manufactured in Port Melbourne from September this year.

Apart from giving Toyota Australia’s $300 million engine plant a much-needed boost in the face of dwindling Camry sales both here and overseas, local production of the similarly sized RAV4 could represent the company’s greatest sales growth potential – both in domestic and export terms – as well as its most modest plant investment.

Just as Toyota has now confirmed a hybrid version of the Kluger/Highlander will continue to be offered into the next generation (making a diesel version to rival Ford’s Territory even more unlikely), the next RAV4 will also come in hybrid form, powered by the same 2.5-litre petrol-electric drivetrain as the new Camry Hybrid due next month.

Irrespective of its third model line prospects, Toyota has said its local car-making operations will depend on some form of government subsidy beyond the life of the current Camry and next Aurion (due in April), in the same way that Ford’s Australian manufacturing future is certain only until 2016 and Holden’s is locked in for a further two years or so.

“For new investment we need some kind of assistance,” said Mr Yasuda last July. “For the current operations we are okay. Camry, hybrid Camry and Aurion production is all locked in – it’s what comes next after 2016-17.” As part of the US Kluger manufacturing announcement, Toyota said it would boost annual production at Princeton from a current 280,000 to about 330,000 units in the second half of 2013, when it would commence production of the Highlander Hybrid and export versions of the petrol Kluger for Australia, Russia and other markets.

Toyota sold about 1.3 million examples of the Highlander (introduced in 2001) and Highlander Hybrid (introduced in 2005) in North America between 2001 and 2011, including more than 100,000 petrol models and about 5000 hybrids last year.

Established in 1996, Princeton employs about 4800 workers and also produces the Sequoia full-size SUV and Sienna people-mover.

Australia’s current Kluger and North America’s existing Highlander Hybrid come from Kyushu in Japan, but the MkIII model will not be produced there as part of Toyota’s new policy to build its vehicles where most of them are sold, and its desire to reduce exports from Japan due to a soaring yen that has undermined profitability.

The Kluger – Australia’s second best selling medium SUV last year behind the Territory – is also produced in China (since mid-2009) and Canada (since late 2008).

Also last week, Toyota announced a boost in annual capacity at its Karawang plant in Indonesia by 50,000 to 120,000 vehicles in an effort to keep pace with demand in southeast Asia’s top economy.

Toyota told Reuters it would invest an additional 15 billion yen ($A180.5m) at Karawang, which produces the Kijang Innova people-mover and Australian-designed Fortuner SUV for domestic and export markets including Thailand and South Africa.

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