It’s no secret that the Chinese market is seen as a key battleground for automakers over the next two decades – and now Toyota, the manufacturer that is leading the way in the rest of the world, has outlined its initial plans for this developing sector.

The company will build a research and development centre in China, possibly as early as next year according to reports in The Nikkei, making it the first Japanese car maker to establish a Chinese research and development centre that it will fund on its own.

Toyota has dropped its strategy of selling the same models worldwide and will instead look to customise its vehicle offerings to the characteristics of each region. It has already begun discussions with Daihatsu Motor Company on joint development of low-priced vehicles for emerging markets.

The company hopes to go one step further in China, which is expected to become the world’s largest automobile market in 2009, by picking up on local trends and reflecting them in its products. Its research and development facility, which will reportedly be situated on the outskirts of Shanghai, will produce models especially for the Chinese market that are competitive both in terms of performance and price.