Nov 26 (Reuters) - Toyota Motor Corp is in talks with BMW AG for a partnership in environmental vehicles, business daily Nikkei reported.
Under the proposed agreement, the German automaker will provide diesel engines, most likely 2-liter versions for midsize cars, for Toyota's passenger vehicles sold in Europe, where its sales fell 9 percent in 2010, the newspaper said.
The starting date of the project and its scale are yet to be decided, the financial paper said.
This is the Japanese automaker's second green-technology tie-up with a foreign automaker giant, Nikkei said. In August Toyota and Ford Motor Co agreed to together develop hybrid trucks and SUVs.
Toyota hopes to improve the marketability of its diesel vehicles by procuring engines from BMW as the strong yen continues to hurt the price competitiveness of its hybrids, Nikkei said.
The deal is expected to help Toyota reduce development expenses by having domestic and Polish factories make diesel engines for fewer models. However the Japanese company is expected to share its technologies for hybrid systems if requested, the daily reported.
BMW, on the other hand, will be able to expand its lineup of green vehicles, having signed a deal last year with France's PSA Peugeot Citroen Group to jointly develop hybrid systems for subcompacts, the newspaper said.
The growing demand for green vehicles along with rising crude oil prices have prompted major automakers to join forces to slash costs, in order to cut vehicle prices, the Nikkei said.