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TOKYO (Reuters) - Japan's Toyota Motor Corp. (7203.T: Quote, Profile, Research) said on
Thursday it began production of the Prius hybrid car in China with local joint venture
partner FAW Group as planned, with an aim to sell 3,000 units in 2006.

The move marks a significant first step in Toyota's aim to promote the gasoline-electric
vehicles in China, one of the world's biggest and fastest-growing car markets, as it aims to
make hybrids a global standard for fuel-efficient vehicles.

It could also help Beijing deal with pollution and energy shortage problems, which it fears
could slam the brakes on economic growth. Hybrids burn less fuel by adding one or more
electric motors to a standard petrol or diesel engine.

"In addition to China's new automobile policy that encourages the use of hybrid vehicles,
the introduction of emission regulations on par with those in Europe and the United States
is also moving forward," a Toyota statement quoted Executive Vice President Yoshimi
Inaba as saying during a ceremony at the plant in Changchun, northeastern China.

"It is my strong wish that the Prius built here in Changchun will contribute to the
widespread use of hybrid vehicles in China," he said. The production marks the first time
the popular sedan will be assembled outside Japan.

A few months ago, Volkswagen AG (VOWG.DE: Quote, Profile, Research) and General
Motors Corp. (GM.N: Quote, Profile, Research) also announced plans to explore building
hybrids in China with their local partners.

The Chinese-built Prius will be priced between 288,000 yuan and 302,000 yuan ($35,680-
$37,410), compared with around $22,000 in Japan and North America.

Toyota and FAW, Japan's and China's top auto makers, had agreed in 2004 to assemble the
Prius in Changchun by the end of this year with complete knock-down kits imported from

Toyota, the world's second-biggest auto maker and a leader in hybrid technology, is
targeting worldwide hybrid sales of 1 million units a year sometime around 2010.

The China joint venture plant, Sichuan FAW Toyota Motor Co., held 50 percent each by
FAW and Toyota, also builds the Land Cruiser sport utility vehicle at the Changchun site.
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