UPDATE 1-Toyota plans ultracompact car for Europe -paper

(Adds company response, background)

TOKYO, Sept 25 (Reuters) - Toyota Motor Corp (7203.T: Quote, Profile, Research) plans to introduce an ultracompact car in Europe around 2009, tapping growing demand for fuel-efficient small cars to meet the region's tight emission regulations, the Nikkei business daily said on Tuesday.

The car will be produced in Japan, starting at about 100,000 vehicles a year, and Toyota may also sell the model in Japan, the daily said, adding that the price has yet to be determined.

Toyota, the world's biggest automaker, will develop the car by modifying the iQ, a prototype ultracompact the Japanese automaker unveiled at this month's Frankfurt auto show, the daily said.

Measuring 2.98 metres in length, the iQ is around 80 cm shorter than the Yaris subcompact, Toyota's mainstay car in Europe, the Nikkei said.

The ultracompact car based on the concept model is expected to have enough interior space for four people and to be powered by a 1-litre-class gasoline engine, while a diesel option may also be offered, the daily said.

A Toyota spokeswoman said the company could not comment on its product plans.

The automaker expects its European sales to grow 5 percent to 10 percent in 2009, after a 5 percent rise forecast for next year. The company has steadily increased its market share as it adds more diesel-fuelled models and beefs up its small-car line-up.

Unveiling the iQ microcar concept at the Frankfurt International Motor Show earlier this month, Toyota Motor Europe Chief Operating Officer Thierry Dombreval said the car was "not too far" from the production version and would be positioned below the Aygo minicar, jointly developed and manufactured with PSA Peugeot Citroen (PEUP.PA: Quote, Profile, Research). [ID:nT71544]