The plant was a surprise for investors at a time of cooling U.S. sales, but marked good news for U.S. President Donald Trump who came to office on the back of promises to bring back manufacturing and jobs for U.S. workers.
After China tightened environmental regulations, Britain and France made a decision to ban sales of diesel and gasoline-powered vehicles by 2040. Starting next year, the state of California plans to require automakers to sell more zero-emissions vehicles such as EVs.
Additionally, Toyota will help Mazda develop autonomous and connected vehicle technologies, while hoping that some good old fashioned Zoom Zoom will rub off on its very reliable, but often tiresome cars and trucks.
Toyota may purchase roughly a 5% stake in Mazda, which will in turn invest in its Japanese peer, the Nikkei newspaper reported earlier, without saying where it got the information.
Sales of small cars have slumped in the USA amid steadily low gas prices.
The deepening ties between Toyota and Mazda also are driven in part by the enormous costs automakers are facing to develop connected, self-driving and battery-powered vehicles.
Their foremost rival is Tesla Inc.
Last month, the EV maker began shipping the Model 3 sedan, which at $35,000 is relatively cheap compared to previous models. General Motors last won the title in 2011.
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The Volkswagen group, the world's largest automaker by sales volume a year ago, ramped up development of EVs in the wake of its scandal over the use of "defeat software" in diesel-powered cars to cheat emissions tests. The redesigned Camry follows the Prius and C-HR crossover as the third model to built on the system, which the company has said would shave costs and increase the flexibility of its production, allowing it to be more nimble in adapting to market conditions.
Toyota is vying for the spot of No. 1 automaker in global vehicle sales against Nissan-Renault and Volkswagen AG of Germany, as the industry gradually consolidates. Honda Motor Co. plans to sell a new EV in China next year using motors from its joint venture with Hitachi Ltd. The company operates primarily in Japan, North America, Europe and Other Areas.
"For a technology company which lacks the expertise in making cars, Mazda could look like a very interesting acquisition. Maybe Toyota realises this", CLSA managing director Chris Richter said. "It has also sparked Toyota's competitive spirit, increasing our sense of not wanting to be bested by Mazda".
Toyota has 10 US plants in eight states in an arc that runs from West Virginia through Kentucky, Indiana, Alabama, Mississippi and Texas.
The Detroit Three closed several USA factories during the 2008-2009 financial crisis.
Taken together, the plans are likely to be trumpeted as a victory for President Trump's push to manufacture more locally sold vehicles in the U.S. He had threatened Toyota and other auto companies for selling cars to American customers that were built elsewhere.
Purchasing stakes in other companies is not an every day phenomenon at Toyota, which in recent years acquired a minority equity stake in Isuzu Motors Ltd. The company solidified a partnership with Suzuki Motor Corp in February and already sources compact cars from Mazda's lone North American assembly plant in Mexico.