Toyota is strongly considering building a car part plant in Slovakia to supply its factory in the neighbouring Czech Republic, a Slovak government official said on Friday.

According to Reuters, the state's investment body SARIO said talks with Toyota were in an advanced stage and the agency should pick suitable sites in the next three months. The project would help increase investment in Slovakia, one of the main factors driving its crown currency to record highs. "Toyota has a plan to find a location to produce car parts for delivery to the Czech Republic. They have more or less decided for Slovakia," SARIO head Jan Bajanek told the news agency.

He reportedly said Toyota had not yet specified how much it intended to spend on the project, nor did it disclose its production plans.

Reuters noted that Toyota and PSA Peugeot Citroen are building a joint factory for 300,000 small cars near Kolin in the Czech Republic, which should come online early next year.

The core of Slovakia's booming car sector, which accounts for around one third of the country's exports, is linked to Volkswagen's plant, which produces 280,000 cars a year, the reported added.

Volkswagen will soon be joined in Slovakia by Peugeot and South Korea's Kia Motors, which plan to launch their 300,000-cars-per-year plants in 2006 and 2007 respectively.

Bajanek also reportedly said the agency was in preliminary talks with Mazda Motor, which is scouting the region to find a place for a car plant expected to be worth between $US550 million and $1.1 billion.

Slovakia has lured car industry investments in the past few years as companies praise its business-friendly economic reforms, cheap labour force and proximity to both western and eastern markets, Reuters added.