Toyota Motor announced that it has set up a wholly-owned research and development (R&D) center in Changshu, east China's Jiangsu province, according to a media source.

The Japanese automaker's new R&D unit, Toyota Motor Engineering & Manufacturing (China) Co. (TMEC), is located in the Changshu Southeast Economic Development Zone, and will begin partial operations next spring. Through establishment of TMEC, the world's largest carmaker expects to provide the Chinese consumers with products tailored to their needs while taking into account of the products' environmental and safety performance. In the future, it will further improve its market research and R&D work in China, in conjunction with the existing R&D centres in its local joint ventures.

Specifically, TEMC will assist Toyota's Japanese R$D centres in the following operations: (1) to carry out investigations of the environment in terms of vehicle use and of consumers' demand for products, and to reflect the results in the product planning; (2) to verify the quality of products imported into China; (3) to implement investigation and research of energy-saving and new-energy vehicles in the local market; (4) to develop engines for the Chinese market and research alternative-energy vehicles; and (5) to cultivate local talents in China based on the above operations.

Toyota will invest nearly 700 million dollars in its first fully-fledged research and development base in China in a bid to expand its share of the world's largest auto market.

"It will be Toyota's first full-fledged research and development company in China," a spokeswoman for the Japanese auto giant said in Tokyo. Toyota plans to invest 689 million dollars to buy land, build research facilities and a test track, the spokeswoman said.

The new company will survey the Chinese auto market, study quality control at its local assembly plants and develop low-emission vehicles and engines for the local market. The company plans to raise the number of employees from an initial 200 to 1,000.

China overtook the United States last year to become the world's largest auto market in terms of units sold. Auto sales hit 13.64 million units in 2009, up 46 percent on-year, and are expected to rise by a further 25 per cent this year to 17 million.

Toyota has enjoyed healthy sales in China this year, but its vice president Satoshi Ozawa told reporters earlier this month that China's possible tightening policies require careful analysis.

Toyota will coordinate the unit's activities with those of its existing research and development centres run by its Chinese joint ventures, the company said. Asia has been one of major production pillars of Toyota, nearly equalling North America during the six months to September.

Toyota's latest decision came as its sales rebounds from a sharp drop last year due to the global auto industry slowdown and massive safety recalls, which had tarnished its once stellar reputation. The auto giant in late 2009 and early 2010 undertook a series of mass recalls of more than 10 million units worldwide.

Toyota officials have recently told Japanese media that the deep damage from the recall was weakening, but some analysts warned that the problem could still haunt the auto giant.

Lawyers of clients suing the company in the United States last month alleged that Toyota had secretly bought back some of the faulty vehicles in a bid to hide their defects from the public.