Toyota to Make EVs in US in 2025, Agrees to Big Japan Wage Hike

Members of the Toyota Motor workers' union raise their fists as they shout slogans at a rally for the annual "shunto" wage talks at the company head office in Toyota, central Japan, in this file photo taken on March 7, 2017. Kyodo image via Reuters.

Toyota will start making electric vehicles in the US in 2025, Nikkei reported on Wednesday, saying the Japanese carmaker plans to refurbish an existing factory in Kentucky with the goal of producing 200,000 EVs a year from 2026.

The move aims to capture growing demand for clean-energy cars and Biden administration incentives for EVs assembled in North America – Toyota’s largest market – with batteries from a separate plant due to open in North Carolina in 2025, the report said.

Meanwhile, Toyota bowed on Wednesday to a call from the Japanese government for businesses to hike workers’ pay, saying it would accept a union demand for the biggest base salary increase in 20 years.

The world’s biggest automaker said it would also raise bonus payments, as the Kishida government in Japan steps up calls for businesses to hike wages.

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Inflation at 40-year high

As one of Japan’s biggest employers, Toyota has long served as a bellwether of the spring labour talks, which are in full swing at major companies. Many are expected to conclude swiftly as the government seeks inflation-beating wage hikes to ease burdens on consumers.

Toyota’s incoming president Koji Sato said the decision to accept the union’s demands in full set a benchmark for pay negotiations that he encouraged the rest of the automotive industry to follow, according to an internal publication on the company’s website.

The union federation representing 357,000 Toyota group workers had said the base pay rise it had sought was the biggest in two decades, though it had not detailed the size of the increase.

With inflation running at the highest level in 40 years, Japan is under more pressure than ever before to raise wages to revive consumption.

But with the economy struggling – it averted recession in the fourth quarter but grew much less than expected – analysts say pay increases will remain limited to big firms, such as Toyota.

Small and medium-sized companies, which employ most Japanese workers, will struggle to afford pay rises, they say.

Toyota said a deal with the union was struck after the first round of negotiations on Wednesday, adding that the wage increase would also be applied to part-time workers and senior contract workers.

The Asahi newspaper, which first reported the agreement, said the union had also sought one-off bonus payments worth 6.7 months of wages.

The All Toyota Workers’ Union is set to hold a media briefing later on Wednesday.

PM urges faster wage increases

The pay agreement comes as Prime Minister Fumio Kishida has stepped up calls on business leaders to accelerate wage increases, warning of a return to stagflation if pay rises fall short of the rapid increase in prices.

“We will boost consumption and expand domestic demand by promoting efforts toward structural wage increases,” Kishida said at a lower house budget committee session on Wednesday.

Honda Motor Co‘s labour union is demanding the highest pay hikes in decades, while the workers’ union at Nissan Motor requested a monthly wage increase of 3.5%, according to news agency Jiji Press.

Fast Retailing Co, which owns clothing giant Uniqlo, last month said it would boost pay by up to 40%, fuelling expectations big manufacturers would offer more at annual wage talks with unions this spring.

Video game maker Nintendo Co said earlier this month that it planned to lift workers’ base pay by 10%, despite trimming its full-year profit forecast.