Guangzhou Automobile Industrial Group reportedly said its planned joint venture plant with Toyota Motor would make 300,000 engines per year when it starts production in 2005, according to Reuters. Guangzhou Auto chairman Zhang Fangyou told the news agency on the sidelines of a conference that about two thirds of the two to three-litre engines, which will be made for Toyota's mid-sized models such as the Camry, will be earmarked for export.

Reuters noted that city government-owned Guangzhou Auto, China's fourth-largest vehicle maker, recently signed an agreement with Toyota to make sedans in Guangzhou, making the Japanese firm the third of Japan's top three car makers to set up a manufacturing base in the southern Chinese city.

The engine plant, with designated annual capacity of 500,000 units, is part of that agreement, the report added.

Guangzhou, about two hours by train from Hong Kong, is at the heart of the Pearl River Delta, an engine of China's export-driven growth and one of its wealthiest regions, Reuters said, adding that, while it has lagged behind Shanghai and northeastern Chinese cities in developing an automotive industry, Guangzhou has in recent years managed to lure investment from Japan's big manufacturers to jump-start its car making sector.

"The Pearl River Delta is China's largest car-consuming market," Zhang told the news agency, adding that the region accounts for one in four sedans sold in China.

The Reuters report, citing Zhang, said the Toyota engine venture in the new industrial district of Nansha has been approved by Beijing, but the car making portion of the tie-up still needs central government approval.

Reuters said he declined to disclose financial details or the shareholding structure of the venture, but Hong Kong media have reported that total investment in the engine plant would be about 30 billion yen ($US276 million).

Zhang also told Reuters that, leveraging the success of its tie-up with Honda Motor, Guangzhou Auto expects to post sales of more than 32 billion yuan ($3.86 billion) in 2003, up 60% from last year.

Reuters said that Guangzhou Honda, which is indirectly held by Guangzhou Auto's Hong Kong-listed arm Denway Motors, sold 90,853 cars in the first 10 months of this year, up 83% from the same period a year earlier.

Guangzhou Honda expects to sell 117,000 cars, including 81,000 Accords, 20,000 Odyssey minivans, and 16,000 Fit [Jazz-based] sedans, a senior Honda executive told the news agency at the event in Guangzhou.