President Trump has made it a priority to push foreign automobile companies to set-up in the U.S.
He campaigned on promises to increase manufacturing and expand employment for American auto workers.
The company continues to expect consolidated vehicle sales of 8.9 million units for the year, in consideration of the latest sales trends worldwide. "Maybe Toyota realizes this", said Chris Richter, analyst and managing director from CLSA. If not, the plant will have the flexibility to shift to another model, according to spokesman Scott Vazin.
Japan's largest carmaker is mulling taking a roughly 5 percent stake in Mazda, while Mazda may also invest in Toyota, the sources said.
If "basic structure" is anything to go by, there could be a joint EV platform in the pipeline from Mazda and Toyota but it's too early to say.
Toyota has sold more than 10 million hybrid gasoline-electric vehicles globally, including the Prius, since 1997. But recent breakthroughs in batteries allow for longer travel per charge. Japanese rival Nissan Motor Co.is allied with Renault SA of France and Mitsubishi Motors Corp., and is the global leader in electric vehicles. By cooperating with Mazda, which is strong in the production of sport-utility vehicles, Toyota intends to catch up.
With growing competition from tech giants in the auto industry like Alphabet's Waymo, Apple, and Amazon, traditional automakers are now turning to commodities.
Both Toyota and Mazda signed an agreement in May 2015 which stated that the pair would explore various areas of collaboration.
The Japanese automakers said in a statement Friday that the facility would be operational by 2021, but did not specify where it would be built.
Mazda will gain from this deal that allows the smaller automaker a foothold in production in the US, as it now ships every vehicle sold in the U.S.to that country, its largest market, from Mexico and Japan.
The union has struggled to expand beyond its stronghold at Detroit automakers to foreign-owned plants, especially in the southern US. That's why Toyota and Mazda are now teaming up to build electric cars together. Toyota announced plans in January to invest $10 billion in USA operations over the next five years. Although, Ford cut its stake in Mazda in 2008. Operating profit in Japan increased 9.9 percent to 319.2 billion yen ($2.84 billion) in April-June period.