As production of Toyota's core Camry and Corolla models grew, TMMK and TMMC had begun local production of passenger car engines, and significantly increased their local procurement ratios. To minimize the risks associated with the yen's appreciation and steadily implement the company's New Global Business Plan (created in 1995) as well as respond to the imminent full regional free trade that would accompany the North American Free Trade Agreement (NAFTA), Toyota hurried to establish its North American supply structure under a policy of producing all core engines locally.

In 1996, Toyota established Toyota Motor Manufacturing, West Virginia, Inc. (TMMWV) to build engines, and, in 1998, TMMWV started production of ZZ-type engines, which until then had been supplied from the Shimoyama Plant of Toyota Motor Corporation (TMC) in Japan, for the North American-produced Corolla.

TMMWV was subsequently expanded to address supply shortages caused by an increase in the number of vehicles produced in North America. The plant began manufacturing MZ engines for Avalon models in 1999, and output capacity grew to 500,000 engines per year.

In addition to engines, TMMWV began manufacturing Toyota's first automatic transmission units outside Japan in 2001, supplying 4-speed automatic transmissions to TMMK and TMMC for use in Camry and Solara models. The plant also produced engines and automatic transmissions for the Lexus RX 330 from 2003, and 6-speed automatic transmissions for the Avalon and Camry from 2006.

With the steady expansion of engines and automatic transmission production at TMMWV, Toyota achieved NAFTA regional procurement ratios (NAFTA ratios) of 70 percent and 65 percent for the Camry and Corolla respectively, exceeding the free trade standard of 62.5 percent. However, at the end of the 1990s the NAFTA ratios for the company's Tundra and Tacoma light trucks remained below 60 percent. Toyota needed to lift its local procurement ratio above the NAFTA standard, a matter that was also critical in order to boost competitiveness in the midsize and large pickup truck market, the traditional stronghold of the American Big Three automakers.

To address this need, in 2001 the company established Toyota Motor Manufacturing, Alabama, Inc. (TMMAL) in Huntsville, Madison County, Alabama, which was tasked with manufacturing truck engines. In 2003, TMMAL began production of 4.7-liter V8 engines (2UZ type) for Tundra pickup trucks. This was the first time Toyota had manufactured V8 engines outside Japan.