Toyota commits to making cars in Canada as U.S. rivals downsize

Toyota Motor’s latest compact crossover will roll out of a plant in Ontario starting in December, a sign of the Japanese automaker’s commitment to making cars in Canada at a time when U.S. rivals are shrinking production in the country and newly arrived Chinese competitors are ramping up sales.

The updated, hybrid-only Lexus NX is one of three models made at Toyota’s 38-year-old factory complex in Cambridge, Ontario, along with the Toyota RAV4 crossover and Lexus RX SUV. While some of those are sold locally, about 85% are earmarked for export — mostly to the much larger and more lucrative U.S. market.

It also builds the RAV4 at another Ontario facility located about 48 kilometers away. The plants produced a combined 537,518 vehicles last year, making Toyota the largest vehicle manufacturer in Canada.

The U.S. is a crucial market for vehicles made in Canada and the sector has been hit hard by U.S. President Donald Trump’s tariffs on imports, which have eroded profitability and spurred some carmakers to downsize their operations in the country. The White House has threatened to increase tariffs on autos to 50% if a broader trade deal isn’t reached by Jan. 1.

Toyota invested $1.1 billion in its Canadian operations for the latest RAV4 model, which began production in January, and hundreds of millions of dollars more for the newest NX. With all of the carmaker’s factories running at or close to full capacity, Toyota sees Canada as a vital cog in its global manufacturing network and key to its four-decade localization efforts.

“We’re fully committed to making cars in Canada for the long term,” Scott MacKenzie, director of corporate affairs at Toyota Motor Manufacturing Canada, said in an interview, noting its local factories run two full shifts plus regular overtime. “We continue to invest here and think Canada is a great place to make cars.”

The commitment to Canada by Toyota and fellow Japanese automaker Honda Motor comes at a time when competition is being stoked by the entry of Chinese-made cars. While the number of permitted imports from China remains relatively small — about 50,000 vehicles a year — that allotment will steadily grow under a deal Ottawa reached earlier this year with Beijing.

China’s Geely Automobile Holdings has plans to launch sales in Canada next year, positioning it to be the first Chinese mass-market maker of electric vehicles to establish a presence in the country.

General Motors has long been the market leader in Canada with 2025 sales of about 300,000 cars and trucks. But Toyota is rapidly closing the gap, with record deliveries of 249,445 vehicles last year — a gain of 4.4%. But that came against a backdrop of a market that has been growing more slowly, rising 2.1% to some 1.9 million new car sales.

Heightened trade tensions between the U.S. and Canada have exacerbated a longer-term decline in Canadian vehicle production due in part to labor and other fixed costs. The number of cars assembled in the country has fallen from around 3 million in 2000 to 1.3 million in 2024.

The three major Detroit-based automakers have scaled back their production footprint in Canada in recent years.

GM eliminated a shift at its truck plant outside Toronto earlier this year, and ended output at another factory in Ingersoll, Ontario, last year. Stellantis, which owns the Jeep and Ram brands, halted production in 2023 at a Toronto-area factory it now plans to sell, and cut a hybrid version of its Pacifica minivan from the production lines at a sibling plant in Windsor, Ontario, near Detroit.

Ford Motor has reconfigured its vehicle manufacturing operations at its Canadian vehicle assembly plant to concentrate solely on heavy-duty truck production, shifting in 2024 from a plan to make all-electric vehicles there and its prior focus on crossover SUVs.

Even Honda, which makes the compact Civic sedan and CR-V crossover in Canada, has paused plans to expand capacity. It scrapped plans earlier this year to build a 15 billion Canadian dollar ($10.6 billion) EV battery supply chain near its existing Ontario plant as part of a broader strategic pivot.