Toyota Motor has denied a newspaper report that it was planning to start assembling plug-in hybrids in China by 2012, when it kicks off domestic production of the vehicles but has confirmed it will license hybrid technology and supply parts to Chinese partner FAW Group.

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The Nikkei business daily reported on Wednesday that Toyota’s joint venture with China FAW Group would make the plug-in hybrids, which can be recharged from an outside power source, in addition to running as a conventional hybrid car.

“We have no plans to produce plug-in hybrids in China,” a Toyota spokeswoman told Reuters.

Ahead of starting Chinese production and sales, Toyota will test the vehicles in Tianjin, the Nikkei said.

Meanwhile, citing company sources, Kyodo News said Toyota is negotiating a deal to license its expertise in hybrid vehicles and to supply parts to FAW Group.

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The carmaker plans to offer the technology necessary for making vehicles powered by petrol and electricity as well as motors, batteries and other parts for use in the FAW Group’s hybrids due to be marketed in 2013 or later, according to the sources.

The aim is to bolster Toyota’s presence in the Chinese market, where the company is lagging behind such competitors as Volkswagen and General Motors.

The proposed licensing deal could become Toyota’s fourth involving hybrid technology and the first with a Chinese carmaker. The Japanese company earlier made such arrangements with Nissan Motor, Ford and Mazda.

Toyota is also in similar talks with Daimler, the sources added.

In late 2005, Toyota began manufacturing its Prius hybrid in China through a joint venture with the major Chinese carmaker. However, it has not assembled the third generation model, launched in 2009, there. Production started this week in Thailand.