Until recently, the Infiniti QX56 was produced in Canton, Mississippi, using V-8 engines made in Decherd, Tennessee. This makes sense since the U.S. is largest market for luxury SUVs. But now Nissan is planning to move production of this low volume SUV to a plant in Japan.

The engines will still be made in Tennessee, then shipped to Japan to be installed in the cars, which will then be shipped back to the U.S. for sale. How can that make sense? Well, it appears that the time and cost involved in shipping is less expensive than setting up an engine plant in Japan.

But for how long? Inifiniti sold 7,657 units in 2008, down from 12,288 in 2007. But as the economic recovery progresses, Americans will again buy luxury SUVs. In fact, inventories of the Infiniti QX56 have been too low this summer. Ben Poore, the Vice President of Infiniti’s business unit in North America has already asked Nissan to increase production.

Will increased demand make it worth it for Nissan to build a plant in Japan to make the engines as well as the rest of the vehicle? Or will the shipping costs kick in and cause Nissan to move the production in the Infiniti QX56 back to the U.S.?

Source: Automotive News