TOKYO -- Toyota Motor Corp. said on Wednesday it had signed a deal to expand its alliance with China's First Automotive Works (FAW), including the construction of a new vehicle plant in China.
The automakers said in a joint statement that they would build a plant in the northern Chinese city of Tianjin to produce cars based on Toyota's Crown luxury sedan model from 2005 with output targeted initially at 50,000 vehicles a year.
The two automakers also plan to jointly produce three other Toyota models -- the Corolla, the Land Cruiser and the Land Cruiser Prado -- at factories in China.
"Through our latest agreement, we plan to introduce four more Toyota brand cars into China. This means our alliance with Toyota has entered into a new stage," Zhu Yanfeng, president of FAW, China's biggest automaker, said.
Yanfeng said total investment for the planned expansion would be more than $362 million.
Toyota, in a bid to muscle its way into one of the world's fastest-growing markets, formed a broad alliance in August with FAW to make 300,000 to 400,000 luxury sedans, compacts and SUVs annually in China by 2010.
As part of the alliance, Toyota in October rolled out its first Chinese-made car, the Vios, at a Tianjin plant owned 50 percent by Toyota and 50 percent by Tianjin Automotive Xiali Co. Ltd., which itself is 51 percent owned by FAW.
Under the latest pact, production of the Corolla, a small car, will start in the spring of 2004 at the joint venture's Vios plant, with annual output targeted at 30,000 vehicles.
Output of two SUVs -- the Land Cruiser and Land Cruiser Prado -- will begin at two other Chinese plants by year end, with initial annual production targets of 10,000 units and 5,000 units respectively, they said.
Toyota, the world's third-biggest automaker, is a relative latecomer to the rapidly growing market in China, where Volkswagen , General Motors and Honda Motor Co. Ltd. have been making cars for years.
"We see China as a most important market that is expected to grow rapidly. This is the main reason why we believe the auto sector is still a growing -- not mature -- industry," Toyota President Fujio Cho said.
Cho also said the introduction of the Corolla -- a worldwide strategic model -- would enable the two firms to enlarge their alliance further to include commercial vehicles if needed.
Toyota's Executive Vice President Kosuke Shiramizu said total Chinese output of Toyota brand cars, including the Vios, would total more than 150,000 units in 2004.
Thanks to healthy demand from Chinese clients, output of the Vios model was increased to 5,000 units per month from April, which Shiramizu said would bring the annual output for that model alone to more than 50,000 units a year.
The Chinese market has ballooned in recent years along with rising incomes, a result of years of solid economic expansion.
Annual car sales in China broke the one million mark for the first time in 2002, surging 56 percent to hit 1.1 million.
Toyota is targeting a 10 percent share of the burgeoning Chinese market by 2010.
Still, analysts see no immediate impact from the expanded alliance on Toyota's share price, which closed down 0.38 percent at 2,640 yen, while the benchmark Nikkei share average dipped 0.91 percent.
"Toyota is a relative latecomer to China but it is hitting back well since the introduction of the Vios, thanks to its brand name and booming consumption in China in the aftermath of falling prices on imported cars," said Tsuyoshi Mochimaru, auto analyst at Daiwa Institute of Research.
"China has huge potential but the latest news will hardly be a factor in moving Toyota's shares yet. For Japanese automakers like Toyota, their exposure in China is still very small compared to their mainstay North American market," he said.