French carmaker PSA Peugeot Citroen and Japan's Mitsubishi Motors Corp denied a report on Thursday that they are working together to develop and produce parts for plug-in hybrid vehicles.

Japan's Nikkei newspaper said the two, which already cooperate on electric vehicles and some sport utility vehicles (SUVs), were each developing their own plug-in hybrids.

It said they planned to cooperate on the development and production of engine components and may also supply their hybrid vehicles to each other, without citing sources.

Mitsubishi Motors would supply large-capacity lithium ion batteries to Peugeot through an affiliate, the paper said.

We deny the information, said a Peugeot spokesman. We are working well with Mitsubishi on electric vehicles. We have our own research into plug-in hybrids.

Mitsubishi Motors President Osamu Masuko told a small group of reporters in Tokyo: It's not true. We're working on plug-ins separately and we intend to develop ours completely on our own.

Plug-in hybrids, which sip gasoline and are low in greenhouse gas emissions, have large batteries which can be recharged at home with an extension cord, unlike conventional gasoline-electric hybrid cars, which have batteries that are powered only when the driver hits the brake.

Mitsubishi is due to begin selling its first electric car, the i-MiEV, to fleet customers on July 23. Masuko said on Thursday Mitsubishi Motors planned to beef up staffing for electric vehicle production by more than 100 through labor-sharing deals with other companies.

As part of a June 2008 agreement to tie up in electric vehicles, Mitsubishi is to begin supply of i-MiEV electric cars to Peugeot as early as next year, and the firms are also planning to jointly manufacture cars in Russia.

Mitsubishi has been developing a plug-in hybrid car for commercial release by 2013.

Toyota Motor Corp, which leads the hybrid market, is working to achieve the world's first mass-produced plug-in hybrid cars in 2012, the paper said.

Peugeot shares opened 2.15 percent higher and gained in the morning after the report, but by 1230 GMT had fallen back to trade 0.24 percent higher. The DJ Stoxx European Autos Index was up 1.5 percent.

Japan Nikkei 225