(Adds number of automotive suppliers in Alabama)

By David Shepardson and Bernie Woodall

Jan 9 (Reuters) - Alabama will be the site of a new $1.6 billion Toyota Motor Corp and Mazda Motor Corp auto plant, a victory for President Donald Trump who had prodded manufacturers to build new U.S. facilities and threatened tariffs on foreign production, sources said on Tuesday.

The plant, which will employ up to 4,000 people and produce about 300,000 vehicles a year, will be located in Huntsville, Alabama, and is a boon for the state, where Toyota has a large engine plant and an existing network of automotive suppliers.

A formal announcement by company and state officials is expected on Wednesday in Montgomery, sources briefed on the matter said.

The new plant --in a state Trump won by 28 points in 2016 -- could be a political boost to the Republican president, who has urged automakers to build plants in the United States and add jobs. The companies said they expect the plant to open in 2021.

Trump tweeted in March he wanted "new plants to be built here for cars sold here." The White House did not immediately comment on Tuesday.

The announcement also comes at a time of declining U.S. auto industry sales, so it could exacerbate overcapacity and add pressure to cut prices. U.S. new vehicle sales fell 2 percent in 2017, after hitting an all-time record high in 2016, and are expected to fall further in 2018.

Details of an anticipated tax and incentive package for the investment were not yet known. It has been reported the companies sought at least $1 billion in incentives.

A Toyota spokesman declined to comment, except to say an announcement was expected soon. A Mazda spokeswoman also declined to comment.

In recent months, the companies had narrowed their choices down to sites in Alabama and North Carolina.

Local media last month said the leading site under consideration was in northern Alabama's Limestone County, near Toyota's large engine plant in Huntsville. In September Toyota announced a $106 million technology upgrade for the Huntsville plant.

A Chamber of Commerce of Huntsville website for the "Huntsville Mega Site" touts the fact it has been "certified as development-ready." The commerce chamber, local and state officials declined to comment on Tuesday on plans for the plant.

A year ago, President-elect Trump criticized Toyota and threatened hefty tariffs against the Japanese automaker if it built its Corolla sedan for the U.S. market in Mexico.

"Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax," Trump posted on Twitter in early 2017.