TIANJIN — Toyota Motor Corp. confirms plans to expand its joint venture with Tianjin Automotive Industry Co. Ltd. by manufacturing 1.3L Corolla compact sedans (see FOCUS ON CHINA — June '99, p.4).

The automaker estimates it will build 30,000 of these cars in the first year of production, slated for 2001.

The JV, a partnership between Tianjin Auto and Toyota subsidiary Daihatsu Motor Co. Ltd., already builds the Daihatsu-based Xiali subcompact car and Hijet microvan. The partners plan to build a second factory to manufacture the Corolla as soon as they receive government approval. Total investment is reported to be US$1 billion.

Toyota's Beijing representative, Atsushi Sakamoto, says in a published report that the automaker believes China's automotive future is in the small car market and a private-sector customer base.

Currently, government and business orders dominate the automotive market, but Toyota, as well as the state, is counting on this scenerio to change. China is encouraging private car ownership to help boost economic growth, which is expected to rise 7% this year, compared with 7.8% in 1998.

To help encourage private ownership, the government has ordered its four main banks to provide car loans to potential buyers. Passenger car sales were up 6.8% in the first four months of the year, to 544,700 units, compared to same period last year.

The Corolla will fill a void of smaller displacement engines, which typically power economy cars. Though plans are in the works, no automaker manufactures 1L-1.3L engines here — which experts say are well-suited to China's conditions — including a large population, relatively low per-capita income, limited natural resources and often-sketchy road conditions.

Dongfeng Motor Corp., First Auto Works and Shanghai Volkswagen Automotive Co. Ltd., three of the country's primary automakers, have plans to jump into this engine class by developing small, economical passenger cars.

Toyota reportedly, so far, has invested about US$359 million in China, including US$67 million in a venture with Sichuan Van Mfg. Factory to produce Coaster luxury bus, beginning in 2001.