GUANGZHOU, China -- Toyota Motor Corp. is building an export base for engines, components and eventually cars in south China's Guangdong province.
The Japanese automaker will start exporting 2.4-liter engines from its manufacturing joint venture with Guangzhou Automobile Industry Group in early 2005. The venture, Guangqi Toyota Engine Co., will export 25,000 engines next year, all to Japan.
But the plant has a 300,000 engine annual capacity, two-thirds of which will be exported. That means exports to other markets -- mainly the United States -- are inevitable.
"Japan is not a high enough volume country," Toyota Motor Corp. senior managing director Akio Toyoda told Automotive News.
Toyoda was in Guangzhou for the signing ceremony of Toyota's latest venture in China, an auto manufacturing plant with Guangzhou Automobile that will start turning out Camry sedans in the first half of 2006. Total investment in the 50/50 venture is 3.82 billion yuan, or $462 million at current exchange rates.
The plant will have an initial annual capacity of 100,000 units, rising to 250,000 as the market demands, said Toyota Motor Corp EVP Kosuke Shiramizu. It will consider making other models "after the Camry is a success," he said.
The new venture will play an important role in Toyota's plans to export more components from China.
"From manufacturing here, we can know the quality and skill level (of the suppliers) here," Masanori Yamase, director of the Beijing office of trading company Toyota Tsusho Corp. told Automotive News. As production volume grows, Toyota can push component costs down and manufacturing skill levels up, he added.
Toyota already exports many parts from China, said Toyota Tsusho (South China) president Akimasa Yokoi, though he declined to give a number. The new manufacturing facility in the south will boost that amount. "In six months I can tell you something," he said.
Honda and Nissan already have manufacturing sites nearby, and Toyota may share suppliers with them, said Tetsuya Ezumi, Toyota group manager of the China division sales department.
The government of Guangzhou, a city of 7 million in the Pearl River delta near Hong Kong, has aggressively courted automotive investment with favorable contract terms.
"The Guangdong government has made it very attractive for to come here," said Tetsuya. "They want to be (China's) Detroit."
As for exporting cars from China, Akio Toyoda gave the standard answer: "Right now demand is very big in China, therefore we have no plans to export cars."
But Tetsuya said: "Exporting cars from China is the next strategy. If we make a good footprint in China, (exporting cars) is a kind of dream."
Toyota has said it plans to invest up to $2.5 billion in China by 2010. Despite the recent market slowdown, the company does not plan to change that goal, said Toyoda. He added that it is impossible to say exactly how much Toyota will invest because China's automotive policy is controlled by the government and Toyota also has to take into account the wishes of its Chinese partners.
Toyota already makes the Vios subcompact and Corolla sedan in a joint venture in northeastern China with First Automotive Works. Assembly of the Crown luxury sedan with First Auto will begin at a new plant in spring of 2005. The Land Cruiser and Land Cruiser Prado SUVs are made at different FAW plants through licensing agreements.