Japan's Fuji Heavy Industries Co. is considering producing its Subaru-brand cars in China when sales of imports reach 5,000 units a year.

"Sales of 5,000 units is the basis for us to produce in China. We will strive to achieve the sales target in 2006," Fuji Heavy said in a statement to China Daily.

Asked whether it will use plants of its biggest shareholder General Motors (GM) in China, Fuji Heavy said: "Subaru has just entered the China market and we are seeking a proper channel for local production. We won't rule out the possibility of finding other partners since GM has its own strategy in China."

Fuji Heavy launched Subaru Legacy, Outback, Impreza and Forester in China in June.

The company has sold 500 cars in China this year and aims to boost sales to 2,500 to 3,000 units next year.

Fuji Heavy will establish Subaru (China) Co Ltd in Beijing during the first half of 2005, which will be in charge of imports to and exports from China as well as be responsible for finding local partners, the company said.

Fuji Heavy clinched a technical licensing deal with State-run Guizhou Aviation Industry Corp in Southwest China in 1992 and formed a joint venture with the Chinese firm in 1998 to produce local brand WOW compact cars based on a Subaru model.

However, Fuji Heavy withdrew from the joint venture last year as a result of sluggish sales.

According to earlier reports, the floundering venture has been taken over by a privately-owned firm from East China's Zhejiang Province.

Analysts say Fuji Heavy is very likely to use GM's facilities in China to produce Subaru cars as it would be more economical than teaming up with other partners.

"It will be difficult for Fuji Heavy to get the blessing from the Chinese Government if it wants to form a new joint venture with other local partners, because it is just a small player compared with global auto giants and the government is controlling new car projects to tame overheating investment in the auto industry," said Li Chunbo, an analyst with CITIC Securities Co.

GM operates four joint venture vehicle plants in Northeast, East and South China with Shanghai Automotive Industry Corp - China's top car producer - and Wuling Motor Corp, one of the nation's biggest mini van makers.

"We expect to cut costs and enable Chinese customers to enjoy more Subaru products (through local production), but top priority now is to find more dealers as Subaru is not well-known and does not have a sound sales network in China," Fuji Heavy said.

The company said that it plans to increase the number of Subaru dealers in China to 70 next year from 40 at present.

(China Daily December 25, 2004)