Toyota Partners With Subaru To Provide Fuel-Efficient Cars For Europe

Rising gasoline prices and new environmental rules fueling European demand for smaller cars.

TOKYO (AP) – Due to the expected demand for fuel-efficient cars in Europe, Toyota Motor Corp., the world's second-largest automaker, is considering a deal to provide small cars to Subaru's auto manufacturer for sale in Europe, according to a Yomiuri newspaper report. The newspaper did not reveal how it got the information.

The partnership, to take place as early as 2008, would include Toyota's popular Vitz model, called the Yaris in Europe, and its Aygo model, which is only sold in Europe.

Toyota will build the cars for Fuji Heavy Industries Ltd., the maker of Subaru-brand autos, on an original equipment manufacturer (OEM) basis, but Fuji will sell them under its own label, the newspaper reported.

Demand for fuel-efficient small cars is expected to surge in Europe due to rising gasoline prices and new environmental rules to be implemented in 2008 by the European Union to limit carbon dioxide emissions, the Yomiuri said.

Toyota spokesman Paul Nolasco was not immediately able to comment on the report.

Toyota currently does not manufacture vehicles for any other companies on an OEM basis, or sell autos made by others car manufacturers.

In October last year, U.S. automaker General Motors Corp. said it ended its alliance with Fuji by selling its entire 20 percent stake in the company. At that time, Toyota bought an 8.7 percent stake in Fuji for $315 million and became the company's top shareholder.

In March, Toyota and Fuji said they will produce Toyota Camrys at Fuji's U.S. plant in Indiana starting in spring 2007.

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