SHANGHAI -- Toyota Motor Corp. and China's First Auto Works have signed a letter of intent to upgrade an earlier licensing agreement to the status of a joint venture.
In April, the two agreed to "cooperate" to produce four Toyota models: the Crown luxury sedan, Corolla compact sedan, and the Land Cruiser and Land Cruiser Prado full-sized SUVs.
If completed, the latest agreement would go beyond that. Although a relative latecomer to China, Toyota is moving swiftly to carve out a major footprint here.
"Toyota wants to push it a little bit forward to establish a joint venture instead of just licensed production," says a Chinese source familiar with the talks. "But it's just a letter of intent, not a final agreement."
Toyota would not confirm that a letter of intent had been signed or what vehicles are under consideration. "If we signed something, it was just details," spokesman Masashi Honda says.
According to the April agreement, Toyota will assemble 10,000 knockdown Land Cruisers annually at an existing FAW plant. Another 5,000 knockdown Land Cruiser Prados will be assembled at a Toyota plant in the southwest China province of Sichuan. Production will begin late this year, Honda says.
Also as part of the April agreement, Toyota is building a plant in the coastal city of Tianjin to produce some 50,000 Crown sedans a year, beginning in spring 2005. It will be the second plant in Tianjin for the Japanese automaker.
Toyota will begin assembling knockdown Corollas at its existing Tianjin plant in early 2004. According to the April agreement, initial annual production of the Corolla will be 30,000 units.
The Japanese automaker also is expanding its capacity in the south China province of Guangdong. In mid-July a Guangzhou Automobile Group executive told Automotive News that his company will form a joint venture with Toyota.
Japanese press reports have said that Toyota will invest $255 million in the venture to manufacture 200,000 to 300,000 Camry sedans annually. But the Guangzhou Automobile executive said no decision has been made as to what products the plant will make.