Toyota Considers U.S. Production of 2026 RAV4 to Counter Tariffs and Meet Demand

Toyota is considering producing its next-generation RAV4 SUV in the U.S. to counteract a 25% tariff on imported vehicles and meet strong domestic demand. Discussions include manufacturing the redesigned 2026 RAV4 at Toyota's Kentucky plant, potentially starting in 2027. The tariff, announced by President Trump, aims to boost domestic manufacturing. Toyota sold over 475,000 RAV4s in the U.S. in 2024, making it the best-selling vehicle. The company is evaluating its production strategy to reduce tariff exposure and currency risks, while maintaining operations in Canada.

Toyota Reassesses Supply Chains in Response to Tariffs

The potential shift in production strategy follows the introduction of a 25% tariff on imported vehicles by the U.S. government, a policy aimed at encouraging domestic manufacturing. President Donald Trump, who announced the levy earlier this month, has indicated that modifications to the tariff may be considered to give automakers more time to adjust. Nonetheless, the tariff has already prompted several global carmakers to reevaluate their supply chains.

Toyota, which currently manufactures the RAV4 in Kentucky, Canada, and Japan, had initially planned to export the new model to the U.S. from Canada and Japan. However, three individuals with knowledge of the matter said the company is now exploring the option of producing the vehicle in Kentucky to reduce exposure to the tariff and currency volatility, particularly fluctuations in the Japanese yen.

Demand for RAV4 Remains Strong in the U.S. Market

The RAV4 has become a cornerstone of Toyota’s U.S. operations. In 2024, the company sold over 475,000 units of the SUV in the United States, accounting for approximately 20% of its total U.S. vehicle sales. According to market research firm JATO Dynamics, the RAV4 was the best-selling vehicle in the country last year, surpassing Ford’s long-dominant F-150 pickup truck.

Toyota produced nearly 1.3 million vehicles in the U.S. in 2024, more than half of its 2.3 million total U.S. sales. The company operates 11 plants across the country, including facilities for auto parts. While it remains unclear how many units of the new RAV4 would be produced domestically, the company is reportedly considering the Kentucky plant as a key site for the model’s next iteration.

2026 RAV4 Redesign to Launch Later This Year

The upcoming RAV4 will mark the first major redesign of the model since the launch of its fifth generation in 2019. Toyota is expected to unveil the overhauled 2026 version later this year, with a gradual rollout planned across global markets. The exact timing of the U.S. launch has not yet been disclosed.

Sources indicated that if Toyota proceeds with the Kentucky production plan, manufacturing would likely begin in 2027. However, they emphasized that any changes to production strategy would require significant lead time due to the capital-intensive nature of retooling facilities and restructuring supply chains.

Toyota Maintains Cautious Stance on Production Plans

In response to inquiries about the potential shift, Toyota stated, “We have nothing to announce at this time and will not comment on speculation.” The company added that it continually evaluates its manufacturing operations to better serve customers and ensure stable employment for its workforce.

Toyota has not indicated any plans to reduce vehicle output in Canada, regardless of the outcome of the Kentucky proposal. The automaker has also stated that it will continue to operate as normal and focus on reducing fixed costs, rather than implementing more drastic measures such as raising vehicle prices in response to the tariffs.

Broader Industry Adjustments to Tariff Policy

Toyota is not alone in reassessing its production footprint. Other Japanese automakers have also begun to adjust their strategies in light of the new tariff regime. Nissan, for example, plans to cut production of its top-selling U.S. model in Japan by 13,000 units over a three-month period. Honda has announced that it will manufacture its next-generation Civic hybrid in Indiana instead of Mexico to avoid potential tariff costs.

The automotive industry’s response underscores the broader impact of the 25% import levy, which has introduced new complexities for global supply chains. While the U.S. administration has signaled a willingness to negotiate, the policy has already triggered significant operational shifts among major automakers.

Long-Term Investment in U.S. Manufacturing

Toyota’s consideration of increased U.S. production aligns with its longstanding investment in American manufacturing. The company has invested nearly $50 billion in the United States over several decades, building a substantial domestic presence that includes vehicle assembly, parts production, and research and development.

As the company evaluates its next steps, sources emphasized that any decision to expand RAV4 production in the U.S. would be part of a broader strategy to ensure supply chain resilience and cost stability in a shifting trade environment.

References

• Exclusive-Toyota weighs adding US production of new RAV4 in response to tariffs, sources say
• Exclusive-Toyota weighs adding US production of new RAV4 in response to tariffs, sources say