JAPAN: September 17, 2004
TOKYO/SHANGHAI - Toyota Motor Corp. (7203.T: Quote, Profile, Research) will start building its Prius hybrid sedans in China next year with FAW Group in a step it hopes would promote the vehicles as the global standard for fuel-efficient cars.
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The move could also help China as it looks for alternative energy sources and tries to keep pollution in check while demand for cars continues to expand.
Toyota, the world's second-largest auto maker, and First Automotive Works, China's biggest, said in a statement this week they may also consider building an FAW-brand hybrid featuring Toyota's technology.
"China's new auto policy places a lot of importance on the environment, and we want more customers to realise the benefits of hybrids," Toyota Senior Managing Director Akio Toyoda told reporters in Beijing, according to a Toyota spokesman.
Gasoline-electric hybrids are the most fuel-efficient mass-market vehicles on the road now, with a four-seater offering about twice the mileage of comparable gasoline-powered cars.
Toyota and partner FAW plan to assemble the Prius in the industrial city of Changchun in northeastern China by the end of 2005 with complete knock-down kits (CKDs) imported from Japan, a Toyota spokesman said.
Output volume has yet to be decided.
The Prius, which costs about $20,000 and can get up to 35.5 km a litre (84 miles per gallon), enjoys a strong following in the United States, where customers wait months for delivery.
Analysts said, however, that it remains to be seen whether they would catch on in China.
"Concerns about safety and the environment are the luxury of developed or wealthy countries," said Tim Dunne, a managing director at consultancy Automotive Resources Asia.
"The government is very serious about protecting the environment, but getting the consumers to buy that is a different story. I don't think people will willingly open their wallets to spend extra money for the environment."
PRIUS IN DEMAND
Toyota, which became the world's first to develop a hybrid car for mass production in 1997, has targeted annual global sales of 300,000 hybrid vehicles by 2005 to lower production costs.
"Toyota is aiming to supply hybrid cars globally ... and we are also considering building the Prius and other hybrid vehicles in North America," Toyoda was quoted as saying at a signing ceremony in Beijing, attended by the presidents of FAW and Toyota.
Toyoda's comment marked a shift in Toyota's stance after the auto maker had repeatedly said it would be difficult to produce hybrids in North America without the necessary components supply base. The Prius is currently only built in Japan.
With global supply for the model falling far short of orders, Japan's top auto maker has said it would raise output capacity by half to 15,000 units a month in the first part of next year.
Rival General Motors Corp. (GM.N: Quote, Profile, Research) , meanwhile, has been promoting the benefits of hydrogen-powered fuel-cell vehicles, including in China, and has said it would be able to commercialise the zero-emission cars by 2010.
China is the world's largest consumer of oil after the United States, importing more than a third of its oil needs. Beijing is concerned that an energy shortage could stymie economic growth.
Under its auto policy revised in June, the government has said it wants to raise the average fuel efficiency on vehicles by 15 percent by 2010 from last year's levels.
To do so, it has said it would support research into alternative powertrains such as hybrids and cleaner diesel engines, while also exploring fuel-cell vehicles.
After doubling in 2003, Chinese car sales are forecast by analysts to rise by a more modest 10 to 20 percent this year as the government tightened controls on auto loans to prevent the possibility of a rash of new sour debt.
In the first eight months of this year, sales totalled 1.506 million cars, up 24 percent from the year before.
Toyota has partnered FAW since 2002, and makes the Vios and Corolla sedans through a joint venture with Tianjin FAW Xiali Automobile Ltd. (000927.SZ: Quote, Profile, Research) . FAW Group unit Changchun FAW Fengyue Auto separately builds Toyota's Land Cruiser 100 model. (Additional reporting by David Lin and Lu Jianxin in Shanghai and Shusaku Hattori in Tokyo)
Story by Chang-Ran Kim and Edwin Chan
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