Toyota announced Friday it will begin manufacturing its Lexus ES sedan at its Georgetown, Kentucky assembly plant beginning in 2015. The shift of production will mean 750 jobs at the plant. The ES will be built on a dedicated line that company officials say will produce 50,000 cars per year.
"I feel like the state has just won the Kentucky Derby," Kentucky Gov. Steve Beshear said.
The Kentucky Economic Development Finance Authority committed $146.5 million in tax incentives to help land the added line at a factory that already produces the Camry, Avalon and Venza. Approximately 6,600 are already employed there. Toyota Motor, Manufacturing Kentucky is the company's largest factory in the U.S.
Toyota said during Friday's announcement that it will invest $360 million at the plant to build the Lexus line. Company executives said they already had about $6 billion invested in the state.
The shift in production from Japan to the United States should help Toyota combat a historically strong yen, says Kelley Blue Book senior analyst Alec Gutierrez.
"Producing the Lexus ES in Kentucky makes sense for Toyota," he said. "While the tax incentives over the next 10 years certainly didn't hurt, the move will allow Toyota to further reduce the risk of a strong yen ... ultimately reducing profits for those vehicles produced in Japan and sold in the U.S."
Lexus has been the top-selling U.S. luxury brand for 11 of the past 13 years. It lost its foothold in 2011 only after suffering a production slowdown in the wake of Japan's earthquake, tsunami and nuclear disasters.
In North America, it has seen sales bounce back since the recession. It sold 56,158 ES models in 2012, a 27 percent surge over the previous year. So far in 2013, it has sold 16,801 models, which puts the ES on pace for its best sales year since 2008.
Perhaps more importantly, the ES has claimed 11.7 percent of the segment's share, up from 9.2 percent in 2012. The move to Kentucky could serve to further boost that increase.
"Shifting production to Kentucky signals that Toyota is willing to break tradition to gain a stronger foothold in the U.S., and could hint that additional Lexus nameplates could be produced in the U.S. later down the road," said Gutierrez.
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