Toyota and Mazda plan to build $1.6 billion US plant in joint venture

Japanese automakers Toyota (7203.T-JP) and Mazda (7261.T-JP) are forming a partnership to build a new final assembly plant in the United States , the companies announced Friday.

A location for the $1.6 billion facility has not yet been picked, but it will have the capacity to build 300,000 vehicles annually while employing 4,000 workers.

The companies hope to open the plant in 2021.

The new facility is just one aspect of the partnership Toyota and Mazda, with the two also planning to work together to develop electric vehicles and connected-car technologies, the sources said.

Both companies have a history are working with other automakers.

Toyota operated a final assembly plant in Fremont, California, with General Motors (GM) until the plant closed in 2010 as GM went through a structured bankruptcy. That plant was eventually sold to Tesla (TSLA) and is currently run by the electric car company.

Meanwhile, Mazda was once in a long-running alliance with Ford (F), until the Dearborn, Michigan automaker decided to end the relationship and sell its stake in Mazda in 2008.

A collaboration between the Japanese automakers would not only give them more flexibility and capacity, it would also help them save on the money needed to develop electric vehicles and future technologies.

In addition, the substantial investment in U.S. manufacturing and the hiring of approximately 4,000 workers will help the automakers withstand criticism from the Trump administration for exporting vehicles from Mexico to the United States.

Analysts at Citi were generally positive on the plan.

"The reported plan to build a new plant in the U.S. looks rational given that SUV
capacity is tight at both companies and protectionism concerns remain," Citi said in a note on Thursday. "Also, amid signs that overall U.S. auto demand has peaked, building a plant via a joint venture will reduce the risk for both companies."