Japan's Toyota entered the Chinese auto industry late, but in the end the potential of the domestic market, softening of Chinese policies towards foreign companies and low cost manufacturing advantages made the decision inevitable.

Our own Awakening Dragon (Marketing in China) columnist Piset Wattanavutukal has always stressed the important strategic advantages of getting into China early, a view reinforced by the early sucesses of Volkswagen AG in a risky early entry, but Toyota hopes that these can be overcome in a young Chinese developing industry still establishing its informal rules, make-up and allegiancies.

Toyoto is entering the market in a joint venture with China's largest automotive manufactuer - China FAW Group Corp, manufacturing Toyota's luxury "Crown" model from Tianjin from 2005.

According to the Japanese newspaper Asahi Shimbun -

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Plans call for production to be expanded in phases to include such small and midsize Toyota models as the Camry and Corolla. The cars will be rolled out in rapid succession to help the partners quickly bolster their market share.

Toyota will also provide FAW with the technical assistance it needs to begin producing sport-utility vehicles. In mid-2003, the joint venture plans to begin producing the Land Cruiser SUV.

Toyota know-how will also be applied to an upgrade of FAW's Red Flag luxury sedan, a favorite of the Chinese elite.

"China is far bigger than other Asian nations. The potential for growth is enormous", Toyota President Fujio Cho said after signing the alliance agreement at a ceremony held Thursday in Beijing. "It's one of our most important markets, so we will expand the range of vehicles we produce here''.

Toyota lags many of its rivals in the market, a legacy of its decision in the 1980s to focus on the United States rather than heeding Beijing's request for greater investment in China.

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Early on the Chinese government taxed the industry heavily, depending as is often the case, on the attractions (and some may say spin) of the world's fastest growing consumer market. Indeed, marketers and investors entering the Chinese market are well aware of the well known overseas and mainland Chinese cultural trait of the 'hard bargain'. The Chinese government and business are of course well aware of their bargaining power, though investors are also aware of the slowly increasing chances of a Chinese bubble looming on the horizon.

The decision to market luxury goods now is a smart one in China, where the consumer market's liking for face-buliding products and the more rapid rise of the Chinese middle and middle-upper class in comparison to the relatively still-impoverished working class mainly in the West and rural regions.