TOKYO — This year Koji Hasegawa, a Toyota Motor Corp. managing director, is commuting to China monthly — or more often if necessary.

He is point man as Toyota works out the details of a plan to produce cars in China and he readily admits there is plenty of working out to be done.

The first step, securing Beijing's approval of a Toyota feasibility study, was taken in January. Next on the agenda: Negotiation of a contract with Tianjin Automotive Industrial Corp., which will need government approval as well. The State Development Planning Commission in January approved the joint production project. Final authorization from the Ministry of Foreign Trade and Economic Cooperation is pending.

“Timing is difficult to predict,” Hasegawa says. “To begin production two years from now is a bit tight. Three years would be better. But Beijing may want a start up sooner.”

In an exclusive interview with FOCUS ON CHINA, Hasegawa emphasizes that a myriad of important details must be settled and that nothing is final. But he implies that a passenger car designed specially for China could be rolling off the line in Tianjin by 2002.

Toyota is proposing a new model based on the New Basic Car platform underpinning the Vitz/Yaris and fitted with a 1.3L engine delivered from a factory already operating in Tianjin.

“The Chinese people need a tailor-made model but want a very conventional 4-door sedan,” says Hasegawa, adding that heated discussions within Toyota preceded the decision that a small car was most feasible for China.

During Beijing negotiations, no mention was made of a “people's car” and size was not dictated by the Chinese officials, but they felt the small-car market would grow rapidly in the future and favored that size model.

Hasegawa says there is ample spare capacity at the Tianjin facilities to make the new Toyota, possibly 30,000 units a year at the start. He declined to confirm Tokyo newspaper reports that annual output would be raised to 100,000 units early on, a volume matching the current capacity of Shanghai General Motors Automotive Co. Ltd.'s Buick plant.

China's master plan to consolidate vehicle makers from an estimated 123 at present to four or five large producers was mentioned frequently during the talks with Beijing officials, he says. But the fact that the Chinese government is willing to make an exception for Toyota raises fresh questions about the current status of consolidation plans.

China's market of 1.3 billion people has major world vehicle makers mesmerized even though only 1.83 million vehicles were sold in 1999, 507,000 of them passenger cars. Despite past disappointments, optimism prevails among those on the outside clamoring for an entry permit. Most players are betting on a market of millions sooner rather than later.

How the count is made, of course, depends on definitions. Annual production of cheap and ubiquitous “farm” vehicles, the small 3- and 4-wheel underpowered diesel all-purpose mini-vehicles not permitted on city streets, already is nearly double that of conventional vehicles.

Hasegawa believes 0.66L Japanese mini-trucks would be popular in China if costs could be cut in half. Given Beijing's concern about the growing gap between rural and urban incomes, he foresees the possibility of mini-truck production, perhaps by licensing foreign technology.

That route was taken by Daihatsu Motor Co. Ltd., a Toyota subsidiary, for the Charade subcompact that Tianjin Auto produces under license in a joint venture with Daihatsu. Tianjin Auto plans to introduce a successor to the Charade, fitted with the same 1.3L engine as Toyota's “China car,” but the two projects are separate.

What turns Toyota strategists on these days is not agricultural vehicles, mini-trucks or subcompacts but cashing in on what they perceive as the latent demand for passenger cars.

They are not intimidated by the 1999 U.S. Commerce Dept.'s report concluding that after pumping billions of dollars into China few U.S. companies there are making a profit.

Japan's No.1 automaker, with a well-earned reputation for moving cautiously and conservatively, expects operations in China to be profitable within three years — “our usual target,” Hasegawa says.

And if economic managers led by Premier Zhu Rongji can engineer an end to an overheated economy this year, Hasegawa says, “I may be a bit optimistic, but my personal projection is for 10% annual growth for the next four years.” If his bold projection proves correct, the introduction of Toyota's China car may be timely — and right on the money.