Japanese auto producer Toyota plans to set up a research and development firm for commercial vehicle fuel cell systems in China this year, partnering Chinese counterparts FAW, Dongfeng, GAC and BAIC and hydrogen fuel cell engine producer SinoHytec.

The joint venture United Fuel Cell System R&D (Beijing) will have a total investment of 320mn yuan ($45mn). Toyota and SinoHytec will hold 65pc and 15pc stakes respectively and the other partners 5pc each. The joint venture builds on the Beijing municipal government and Toyota's initial deal last year for deeper strategic co-operation.

Fuel cell technology uses hydrogen as a fuel to produce electricity and has no carbon or sulphur emissions but only heat and water.

Toyota in July last year said it will provide hydrogen fuel cell components to auto producers FAW and King Long Higer to promote the use of fuel cell vehicles (FCV)s in China.

China's production of FCVs in May increased by 94.6pc from a year earlier to 17 units, with sales up by 86.7pc to 42 units, according to according to data from China's automotive manufacturers association. FCV production during January-May increased by 44.1pc from a year earlier to 309 units, with sales growing by 40.9pc to 322 units.