Toyota will assemble the Prius in China next year with FAW Group. This will be the first time the Prius is built outside of Japan. That Toyota chose China for that expansion rather than the US re-emphasizes the rapidly growing strategic importance of the Chinese market.

Toyota and FAW have rapidly assembled a history together. In 2003, the two companies signed an agreement in April 2003 for technology transfer and the joint production of four vehicle models. Earlier this year, Toyota and FAW established a joint venture to manufacture engines in Changchun City, China, and then established a joint sales operation. The FAW Toyota Changchun Engine Co., Ltd. will have an annual production capacity of 130,000 engines and will commence production of 3.0-liter V6 gasoline engines at the beginning of 2005.

Toyota will build the Prius with FAW at the end of 2005, and may build another hybrid vehicle under a separate FAW brand, the two companies said in a press statement. No further details yet as to production number or investments.

According to Japan Today, FAW will begin making the several thousand Priuses a year using knockdown kits shipped from Japan. Manufacture of the critical hybrid powertrain elements will remain in Japan.