Toyota Motor Corp. lays the groundwork for its first steps into the Mexican market with the formation of a sales arm there.

Toyota Motor Sales de Mexico S. de R.L. de C.V., a subsidiary of Toyota Motor Sales U.S.A. Inc., will plan for a sales, marketing and service operations launch in Mexico City to begin by Jan. 1, 2004, when the North American Free Trade Agreement (NAFTA) evolves into its final form.

This, however, does not necessarily mean that Toyota will be sourcing all products from the U.S., says a company spokesman.

The automaker says it has yet to decide on its product lineup for Mexico, but acknowledges it is considering the Corolla, Echo and Europe-made Yaris. Mexico and the European Union also have implemented a free trade agreement, where import tariffs on vehicles entering Mexico fell to 3.3% from 20% last year and will be eliminated by 2003. Small cars and pickups, Toyota's high-volume products, seem the best fit for the Mexican market, Toyota says. But reports out of Mexico suggest Camry also will be among models sold.

Initial sales targets will be modest, in the thousands rather than tens of thousands, officials say, with the exact entry date depending on the source of supply. Officials deny that this foray into the market positively paves the way for vehicle production in Mexico.