Toyota plans to radically rethink the entire production process and focus on low-cost materials and technology in an effort to create a new cheap car for emerging markets could create a ripple effect throughout the rest of Toyota’s manufacturing process, further increasing its competitive advantage, according to Global Insight automotive analyst, Paul Newton.

“Given Toyota’s resources and global manufacturing footprint, this new entry vehicle for emerging markets should be taken very seriously, as should the further enhancement to its strategy of constant improvement. The model will likely be produced in Russia or Brazil, or both, and will hit the market in 2009/10,” he said in a research note.

Toyota president Katsuaki Watanabe told The Financial Times that the company is developing a radically different design and production process for a new ultra-low-cost car. Watanabe said: ”Everything from design to production methods will be radically changed and we are thinking of a really ultra-low-cost way of designing, using ultra-low-cost materials, even developing new materials if necessary.“

Watanabe added that the processes and materials developed for the new low-cost car could then be applied across its manufacturing and vehicle line-up. Watanabe did not give an indication as to the price of a car produced by this new process, but did allude that it would be ”at least” cheaper than the Renault Logan.

Watanabe also denied speculation that Toyota and Ford are close to a co-operation agreement, saying that no specifics have been discussed. However, Watanabe added: “We are open to discussions with GM, Ford and DaimlerChrysler if there is any possibility of establishing a win-win relationship.”

In light of the stagnation of the western European, Japanese and US markets and the intense competition here squeezing profits, automakers are being forced to look elsewhere for further growth, Newton noted.

“Emerging markets such as Brazil, Russia, India and China (BRICs in industry parlance) are being targeted, but traditional products cannot be sold profitably here, and therefore a different approach is needed.

“The traditional approach towards these markets has been to develop a low-cost car off an older platform, as Renault-Nissan has done with the Logan, derived from the old Clio platform. Nissan plans to produce a similar type of car in Turkey soon. Fiat is using the old Punto platform to extend its range of emerging market, or ‘world cars’, and is working on new designs at its Brazilian operations.

“Toyota’s approach appears radically different to that of its competitors. Toyota already has the Innovative Multi-Purpose Vehicle (IMV) platform, which underpins the Innova MPV and a number of other variations on the theme. It is produced in Indonesia, Thailand and elsewhere, but is not thought to be the source of the new vehicle Watanabe talks of here.

“Toyota’s approach of developing a vehicle from scratch could radically change the competitive landscape and attitude towards low-cost entry vehicles.”

Newton speculated that Toyota’s new model will likely be produced in either Russia or Brazil, or possibly both, as the company has announced an expansion of production facilities in both countries, and it will likely make its debut in 2009/10.

“The fact that the lessons learned will be rolled out across the rest of Toyota’s production operations will further enhance the company’s competitive advantage in key markets such as the United States,” he said.

“Indeed, it is in the US market that Toyota fears a political and consumer backlash against its seemingly unstoppable growth, hence its desire, sooner or later, to establish a co-operative arrangement with the domestic competition there. Although no specifics have been discussed, Ford does seem the most likely candidate and potentially the one with the greatest need, hence the current speculation.”