Japanese car maker Toyota Motor Corp is looking to launch a small car within two years, and the first production facility may be in India, its chairman said on Wednesday.

We are thinking of several countries but maybe first production (unit will be) here, Fujio Cho told reporters on the sidelines of an Indo-Japan business conference attended by Japanese Prime Minister Shinzo Abe.

Toyota, the world's biggest and most profitable automaker, is developing a low-cost car that it expects to sell in emerging markets and, possibly, more developed markets as well.

India had topped the list of global candidates for a site to build the cheap family car, a source had told Reuters earlier this year. Brazil was mentioned as another possibility.

It has been reported that Toyota would build a new 100,000 units a year plant in India, where it has an existing unit near Bangalore with a capacity of 60,000 units.

Toyota owns 430 acres of land at the site, enough for a few more plants and a total annual capacity of 630,000 units.

If Toyota decides to launch a new model, then it would expand capacity in India, Cho said.

We have plenty of room in Bangalore facility. If we build new plant, we will build in current facility, he said.

Toyota sold 48,000 vehicles in India in 2006, where it lags rivals, including Suzuki Motor Corp's Maruti Udyog Ltd, Tata Motors and Hyundai Motor.

Tata Motors is building a small car priced at about 100,000 rupees ($2,440), scheduled to launch in the second half of 2008.

French car maker Renault, which makes its no-frills Logan sedan in India with Mahindra & Mahindra, is in initial talks with Bajaj Auto Ltd on making very competitive vehicles in India.

Renault's success with the Logan and the expectations of the Tata car have prompted other auto makers, including Fiat and Volkswagen, to also examine low-cost models.

Annual passenger vehicle sales in India are forecast to nearly double to 2 million units by 2010. More than two-thirds of the fast-growing market is for small cars.

($1=41 rupees)

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