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Toyota Motor Corp. said Thursday it will start selling the hybrid Prius and two other models in South Korea next year as it expands its offerings in the country beyond the luxury Lexus brand.

"It’s a big challenge for Toyota," Chairman Fujio Cho said of the decision to enter South Korea under the Toyota brand. The local market, which is dominated by domestic manufacturers including Hyundai Motor Co. and Kia Motors Corp., is "pretty tough," he said.

Toyota said it will begin selling the Prius, the Camry sedan in gasoline and hybrid versions, and the RAV4, a compact sport utility vehicle, during the second half of next year through a dealer network.

The world’s biggest automaker by production has set modest sales goals - initially targeting a total of 500 vehicles a month. It said, however, that it plans to quickly double sales to 1,000 vehicles a month.

Toyota has already had success with its Lexus brand, which it began selling in South Korea in 2001. Sales have risen every year, with 2007 the best to date at 7,520 vehicles.

That accounted for 14.1% of the imported car market, just behind Germany’s BMW at 14.3%, according to figures from the Korea Automobile Importers & Distributors Association.

Japan’s Nissan Motor Co. (NSANY), which markets its luxury Infiniti brand in South Korea, also plans to begin sales under the Nissan brand later this year credit scores. Mitsubishi Motors Corp. also has plans to enter the South Korean market.

Honda Motor Co. (HMC) sold 7,109 vehicles in South Korea last year, the third-largest total for foreign automakers.

Toyota previously sold the Camry and Avalon models in South Korea through a local sales agent from 1997 to 1999.

The company manufactured a record 9,497,754 vehicles worldwide in 2007, up 5.3% from the previous year, beating General Motors Corp. of the United States, which made 9.284 million.

Toyota, however, sold 9.366 million vehicles last year, about 3,000 fewer than its U.S. rival. GM (GM, Fortune 500) has been the world’s top-selling car company for 77 years.

Executive Vice President Tokuichi Uranishi said the strong Japanese yen, high costs for raw materials and slackening demand in major markets are casting a shadow over this year, for which Toyota has set an annual group sales goal of 9.85 million vehicles.

"Frankly speaking, the Japanese, U.S. and European markets are very soft … if the current situation continues I think that will be hard" to achieve, Uranishi said of the target.

Toyota (TM) hopes sales in emerging markets such as China and Russia will help cover weakness elsewhere, he said. 

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