April 18, 2013 / 7:01 AM / 5 years ago

Toyota offered $147 mln tax break to build new model in Kentucky

TOKYO, April 18 (Reuters) - Toyota Motor Corp has been offered $146.5 million of tax breaks from the State of Kentucky to add production capacity to build a new model from 2015 at its Georgetown plant, already the Japanese automaker’s biggest U.S. factory.

The offer from the Kentucky Economic Development Finance Authority in a preliminary approval published Wednesday comes as Toyota’s president, Akio Toyoda and Jim Lentz, the manufacturer’s head in North America, prepare to make an announcement on U.S. production on Friday.

Expanding output at the Kentucky facility, which is operated by Toyota Motor Manufacturing Kentucky Inc., would fit with the automaker’s strategy of adding capacity at existing plants rather than break ground at new locations. Toyota had previously said it would freeze plans for any new plants for the next three years.

The tax incentives being offered by Kentucky would be spread over 10 years on an estimated investment of $531 million, creating 750 new jobs, according to a copy of the preliminary approval.

Toyota plans to make its luxury ES Lexus in Kentucky, Japan’s leading financial daily, the Nikkei, reported earlier, without saying where it obtained the information. Toyota declined to comment on the report.

The flagship luxury vehicle, which Toyota does not sell at home, is currently only made at Kyushu plant in Japan. It was the second most popular Lexus model in the United States after the RX SUV in 2012.

When the new ES went on sale last year, Toyota executive Kazuo Ohara said Toyota was aiming to sell about 10,000 ES vehicles a month, including 5,000 in the United States and 3,000 in China. Overall, Toyota wants to sell about 500,000 Lexus vehicles globally in 2013, 23,000 more than last year.

The boost to the Georgetown plant underscores an improvement in the carmaker’s fortunes in the key U.S. market where it has been buffeted by recalls, litigation and upcoming rivals, such South Korea’s Hyundai Motor Co out to grab its market share. The company’s sales rose 27 percent in the United States last year and 9 percent in the first three months of 2013 compared to the same period last year.

Toyota and other Japanese automakers have been pushing to increase production of vehicles in the markets where they sell them to counter a strong yen that had made exporting from Japan expensive. The yen’s decline since late last year has not changed that strategy.

Toyota’s 500,000 vehicle-capacity Kentucky plant makes the Camry sedan, its best-selling model in the United States, as well as the Avalon sedan and Venza crossover. It also makes hybrid variants of the Camry and Avalon, which share the same platform as the Lexus ES.

Reporting by Kevin Krolicki and Yoko Kubota; writing by Tim Kelly

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