Toyota Motor (TMC) plans to use the proposed Indo-Thai free trade agreement (FTA) to make India a hub for small cars to be exported to its global markets, a local paper said on Tuesday.

A few parts already enjoy duty-free status but the Indo-Thai FTA currently under negotiation will make most parts used by Toyota and other car makers duty-free, the Times of India said.

Toyota's Indian JV imports items such as the engine for its Innova and Corolla Altis from Thailand while parts for the new Fortuner SUV launched on Monday, and assembled at its Bangalore unit, are 80% imported.

Top-line Camry sedan, Prado and Land Cruiser SUV models are imported fully assembled but the company plans to use the FTA with Thailand to import parts at zero duty compared with the 7-10% duty it now pays for imported parts for locally assembled cars.

"We are looking at all options to make India the manufacturing base for TMC's global operations. Our Indian operations will see a major change once we launch our small car next year," TMC senior MD Akira Okabe told the Times. He added that, although Toyota is the world's largest carmaker, it cannot have manufacturing facilities worldwide.

Toyota's new Indian small car, scheduled for launch next year, would be exported to increase profitability.

"Global profits of TMC are miserable but the Indian operations are quite profitable," local JV head Hiroshi Nakagawa told the paper.