Toyota invested US$1.1 billion in its Canadian operations for the latest RAV4 model, which began production in January. Photo by Mike Hensen/Postmedia

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

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

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The U.S. is a crucial market for vehicles made in Canada and the sector has been hit hard by 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 per cent if a broader trade deal isn’t reached by Jan. 1.

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Toyota invested US$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 are 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-long localization efforts.

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“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, 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.”

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The commitment to Canada by Toyota and fellow Japanese automaker Honda Motor Co. 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.

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

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General Motors Co. 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 per cent. But that came against a backdrop of a market that has been growing more slowly, rising 2.1 per cent to some 1.9 million new car sales.

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Heightened trade tensions between the U.S. and Canada have exacerbated a longer-term decline in Canadian vehicle production due in part to labour 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.