Toyota Motor Corp yesterday launched a joint venture with China's Guangzhou Automobile Group to produce the Camry sedan in the capital city of Guangdong Province.

The two companies will invest 3.82 billion yuan (US$461.7 million) in the 50-50 joint venture, which has a registered capital of 1.3 billion yuan (US$157.1 million).

The venture, named Guangzhou Toyota Motor Co Ltd, will start production during the first half of 2006 with an initial annual capacity of 100,000 units of Camry, one of the most popular imported models in China. Annual capacity will eventually increase to 250,000 units, said Kousuke Shiramizu, vice-president of Toyota.

Toyota and Guangzhou Automobile in February set up an engine joint venture with a planned production capacity of 300,000 units a year.

The venture, in which Toyota and Guangzhou Automobile control a 70 and 30 percent stake respectively, will begin producing 2.4-litre engines next year to supply Camry needs and for export to North America, Europe and Japan.

Guangzhou Toyota Motor is the Japanese automaker's biggest and fourth vehicle JV in China.

Toyota runs three JVs with First Automotive Works Corp (FAW), one of China's top three automakers, in northern Tianjin Municipality, northeastern Jilin Province and southwestern Sichuan Province.

The venture in Tianjin is making Vios and Corolla compact sedans and will produce the Crown luxury sedan next year.

The ventures in Jilin and Sichuan produce Land Cruiser sports utility vehicles.

Asked why Toyota choose Guangzhou Automobile as a second partner in China, Shiramizu said: "China's auto policy permits us to have two joint venture partners in China, and the two companies (Guangzhou Automobile and FAW) have their own advantages."

"It is in line with our philosophy of producing where there is demand to make Camry in Guangdong, one the biggest (regional) car markets in China," he said.

"At present Toyota has two Chinese partners for bargaining power and other reasons, but in the future nothing will be impossible, such as a consolidation between the Toyota joint ventures," said Xia Jun, an auto analyst with CCID Consulting Co Ltd, the Beijing-based industry consultancy.

Consolidation is "badly needed" for the fragmented auto industry in China as a result of mounting competition, Xia said.

Currently, there are more than 100 vehicle plants in China, including 32 producing passenger cars.

Other foreign auto giants, such as General Motors (GM) and Volkswagen, are reshuffling their businesses in China to cut costs and improve efficiency.

GM recently integrated its joint venture in Northeast China's Liaoning Province with a local partner into its flagship joint venture in Shanghai with Shanghai Automotive Industry Corp (SAIC).

Volkswagen expects its two joint ventures with FAW and SAIC to join in sourcing and sales.

Senior government officials from Guangdong said that they hope Toyota will make the province "its business center in China."

Another two Japanese automakers, Honda and Nissan, are also operating joint ventures in Guangdong with Guangzhou Automobile and Dongfeng Motor Corp respectively.

Zhang Fangyou, chairman of Guangzhou Automobile, said that Guangzhou Toyota Motor will build its own sales channels for the Camry, dispelling speculation that it will employ the Toyota-FAW networks.

Akio Toyoda, a Toyota board member, said that the company sold 20,000 Vios and 20,000 Corollas in China in the first seven months of this year.

Toyota aims to control 10 percent of China's automobile market by 2010.

(China Daily September 7, 2004)