Toyota has agreed to invest about $US2.5 billion with China's First Automotive Industry (Group) Company (FAI) to build up to 400,000 cars a year, Bloomberg News said.

Toyota and FAI plan to make 300,000 to 400,000 sedans, minicars and sport-utility vehicles annually in China by 2010, the companies said today, though they are yet to decide their stakes in the venture, Bloomberg reported.

First Auto President Zhu Yanfeng told Bloomberg that the total investment by both companies would come to about 300 billion yen ($US2.54 billion), although the final amount hasn't been decided yet.

Toyota president Fujio Cho told the news organisation that the cost of setting up annual production of 200,000 cars totals about 150 billion yen, declining to elaborate.

Toyota and Changchun-based First Auto plan to build a new factory in Tianjin, where they will start making 50,000 mid-sized luxury sedans a year by 2005, Toyota spokesman Masashi Honda told Bloomberg.

They also plan to make 100,000 minicars a year in the northern port city by mid-2003 with Tianjin Auto subsidiary Huali, the Bloomberg report added.

Toyota and First Auto will start making between 10,000 and 20,000 sport-utility vehicles a year by mid-2003 in the northeastern city of Changchun, the spokesman told Bloomberg, adding that the choice of models will be decided later. A First Auto spokesman also told Bloomberg that the venture would also make sport-utility vehicles in southwestern China's Sichuan province.

Bloomberg noted that Toyota already had a venture with Tianjin Automotive Xiali, with which it plans to make 30,000 small cars annually in China, basing the first Chinese-built Toyota model, the 1.5-liter T-1 compact on sale in October, on the Toyota Vitz/Yaris/Echo compact.