Toyota Motor Corp will start to produce its hybrid-powered Prius cars in China next year in collaboration with partner First Automotive Works Corp (FAW).

The Prius will be made at FAW Fengyue Automobile Co Ltd, FAW's wholly-owned subsidiary which began technical licensing production of Toyota's Land Cruiser sport utilities last year in Changchun, capital of Northeast China's Jilin Province.

Toyota and FAW will form a 50-50 joint venture based at Fengyue which now has an annual production capacity of 10,000 vehicles.

Prices and planned output of the Prius have not been released.

Toyota and FAW are also in negotiations to introduce Japan's No 1 automaker's hybrid engine technologies into FAW brand cars.

FAW produces its own brand Red Flag sedan in Changchun, and Vizi, Vela and Xiali compact cars in an affiliate in North China's Tianjin Municipality.

"Introduction of hybrid cars in China will be our active response to the nation's new auto industry policy," said Akio Toyoda, a board member of Toyota.

The new auto policy, released in June, encourages development and production of hybrid, electric and diesel and hydrogen-powered vehicles to ease oil shortages and pollution.

However, analysts said the Prius project is part of Toyota's efforts to compensate FAW which has been hurt by Toyota's newly-launched joint venture in the southern Guangdong Province with Guangzhou Automobile Group to make Camry sedans, now one of the most popular imported models in China.

The US$462-million joint venture between Toyota and Guangzhou Automobile will start production during the first half of 2006 with an initial annual output of 100,000 Camry sedans.

"It is very natural that FAW is angry about the tie-up between Toyota and Guangzhou Automobile since FAW and Toyota have reached a strategic alliance in China. The Prius project could be seen as compensation for FAW," said Jia Xinguang from the China Automotive Industry Consulting and Development Corp.

The output of the Prius model in China will be small in the short term but hybrid-powered cars will have rosy prospects in the long term, Jia said.

Toyota and FAW formed a strategic alliance in 2002 to produce 400,000 units of compact cars, medium and high-end sedans and buses in China by 2010.

Underpinned by Toyota, FAW took over the loss-making Tianjin Xiali Automobile Co Ltd in 2002.

Toyota and FAW now run two joint ventures in Tianjin and Southwest China's Sichuan Province.

"The Prius project is not part of our alliance with Toyota and we will have new joint operations soon," said Jin Yi, deputy general manager of FAW.

Toyota said fuel consumption of the 1.5-litre hybrid Prius is lower by 40.5 percent than the 1.6-litre gasoline Corolla being made at Toyota's venture in Tianjin.

(China Daily September 16, 2004)