The jointly developed Toyota-PSA Peugeot Citroen small car due to be launched in 2005 will be powered by one-litre, three cylinder engines built in a new Polish factory, AutoAsia Online reported.

The website said that Toyota would invest about 20 billion yen (about $US160 million) in a factory with a capacity of 100,000 engines a year.

Toyota is currently building a transmission factory in Walbrzych – 300 miles (500 kilometres) south-west of Warsaw – and will select a location for the engine factory soon, the report added.

AutoAsia Online said that, under the terms of an agreement signed in Paris earlier this month, Toyota would supply the one-litre petrol engines for the new car which would also be offered with 1.4-litre PSA diesel engines.

The next big decision will be the location of the assembly plant, the report said.

This, too, could be in Poland but Toyota and PSA teams are known to be also considering potential sites in Hungary and the Czech Republic, AutoAsia Online added.

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