Section 4. Expanding Business in China through Joint Ventures

Item 2. Responses to Rapid Increases in Automobile Production

Sales structures developed

In the 1990s, TMC's business in China was centered on the export of completely built vehicles from Japan. In 1993, Toyota Motor (China) Ltd. (TMCL) was established jointly with Toyota Tsusho as the first distributor in China to develop existing trading company routes. At the time, the establishment of trading companies with foreign capital was prohibited on the Chinese mainland, so TMCL was established in Hong Kong. TMCL gathered Toyota Authorized Service Stations and Toyota Authorized Parts Dealers under its umbrella, focused on development of sales networks in anticipation of the full-scale launch of local production projects, and established a foundation for the authorized dealers that would come later.

In 2001, the year before Tianjin Toyota Motor (now TFTM) commenced production, Toyota Motor (China) Investment Co., Ltd. (TMCI) was established in Beijing to coordinate sales operations. TMCI assumed marketing functions for vehicles produced by Tianjin Toyota Motor.

Following the creation of the alliance with FAW and the start of full-scale joint production in Sichuan and Tianjin, FAW Toyota Motor Sales Co., Ltd. (FTMS) was established as a joint venture with FAW in 2003. As a result, FTMS began handling FAW Toyota Motor joint production vehicles. Later, Guangzhou Toyota Motor (now GTMC) began production in 2006, and the company established systems to handle sales of the vehicles it produced. The result was the creation of a two-channel sales network for vehicles produced in China.

TMCI sought to handle imports of both Toyota and Lexus brand vehicles, but obtaining approval required considerable time. After China joined the WTO in 2001, the restrictions on foreign capital were gradually eased, and when TMCI increased its minimum capital, it was recognized by the Chinese government in 2004 as a Toyota regional headquarters. Also, pursuant to the Automobile Brand Sales Implementation Management Law promulgated and put into effect in 2005, TMCI received approval to conduct trade and wholesale operations in the automotive business, and it became a distributor of imported Lexus and Toyota brand vehicles. In conjunction with this development, Hong Kong-based TMCL terminated operations at the end of that year and all business was transferred to TMCI.

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