The Toyota Motor Corp hopes to set up a co-operation project in China with the Guangzhou Automobile Group to produce passenger cars.

It is the latest sortie by Japanese automakers into the world's fastest-growing major car market.

"We are in negotiations with Toyota for co-operation. But no details are available now,'' said a spokesman from the Guangzhou auto firm.

Toyota appears to be more discreet on the matter.

"We have discussed co-operation with a slew of Chinese automakers, including the Guangzhou Automobile Group, and nothing has been decided,'' said an official from Toyota's Beijing-based office.

If the negotiations are fruitful, Toyota will gain a strong foothold, projecting its ambitious expansion plan in the Chinese market.

Last year, Toyota formed a strategic alliance with the First Automotive Works Corp (FAW), one of the nation's largest automakers, to produce 300,000 to 400,000 luxury sedans, small-sized cars and sport utility vehicles in China by 2010.

However, the alliance will not enable Toyota, a late comer to China for massive local production, to control 10 per cent of the country's total automobile market by 2010.

Another of its aims, Toyota wants 20 per cent of China's passenger car market by 2010.

The market is forecast to increase to more than 8 million units by 2010, including 5 million passenger cars.

Analysts say Toyota will possibly manufacture its Camry sedan in Guangdong Province, which will go head-to-head with Honda's Accord, which is being made at a joint venture (JV) with the Guangzhou Automobile Group.

Toyota started to produce the Vios, its first Chinese-made passenger car, at a JV in North China's Tianjin with FAW in October.

Toyota signed an agreement with FAW in April to introduce four new models -- the Corolla, Land Cruiser, Land Cruiser Prado and Crown into China by 2005.

Honda and FAW have not commented on the negotiations between Toyota and the Guangzhou auto firm.

Other Japanese automakers are also speeding up efforts to expand their presence in China's car market, which is mainly controlled by European and US rivals, such as Volkswagen, General Motors and PSA Peugeot Citroen.

Honda plans to double the annual production capacity of its JV with the Guangzhou Automobile Group to 240,000 cars next year.

Honda now produces its Accord sedan and Odyssey multi-purpose vehicle at the venture.

The JV has produced more than 200,000 Accords since 1998. Honda's Fit compact car will also be launched in September.

The Nissan Motor Co last month launched the largest-ever JV in China with the Dongfeng Motor Corp to produce 550,000 vehicles by 2006, including 220,000 Nissan-brand passenger cars.

The Sunny, the first model from the JV, was introduced at its plant in Guangdong last month.

Volkswagen, which operates two JVs with FAW and the Shanghai Automotive Industry Corp, now commands 40 per cent of China's passenger car market.

The German automaker aims to increase its annual sales in China to 1 million units by 2007, up from 510,000 units last year.

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