General Motors Co. will move production of its revamped GMC Terrain to Mexico from Canada and expand production of the Ontario plant’s Chevrolet Equinox, reflecting the growing popularity of compact sport utility vehicles.
GM has a lot riding on the Equinox and Terrain, which go on sale as redesigned models in the first quarter and this summer, respectively. Small SUVs are a booming segment of the market and a big moneymaker for the company, so when GM planned the new versions, it decided to increase output from one factory to three -- adding the vehicles at two existing facilities in Mexico, according to a GM spokesman.
While the move is GM’s bet that more inventory will mean more new buyers, as well as a play to make more on each sale, it’s also partly a response to hyper competition among automakers seeking an edge through lower production costs. Even so, moving production of the new upscale Terrain to Mexico instead of the U.S. may risk testing the patience of President-elect Donald Trump, who has already used Twitter to chastise GM and Toyota Motor Corp. for importing low-priced compact cars from south of the border. While the companies also sell these models in emerging markets, GMC is chiefly a U.S. brand with premium SUVs that have fatter sticker prices and higher profit margins than small cars.
Duncan Aldred, vice president of global GMC sales and marketing, said GM is using existing plants that can handle the production volume. “We have been planning this for a long time, and we’re using our existing footprint,” he said.
GM sees growth for both vehicles. The automaker predicts the market for small SUVs will expand 10 percent during the next five to six years.
Some of the added production in Mexico is earmarked for overseas. That’s partly because of Mexico’s 44 free-trade deals with other countries, which allow GM to export vehicles tariff-free to markets where it doesn’t have similar agreements, including Brazil, Colombia and the European Union.
In late 2014, GM announced it would invest $5 billion in new plants in Mexico by 2018, creating 5,600 jobs. The Equinox and Terrain facilities, which also make other models, are roughly $1 billion of that. In 2015, GM said it is investing $5.4 billion in plants in the U.S.
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