Toyota is to switch production of the Corolla 3dr from Japan to its UK plant at Burnaston, near Derby, by early 2002. The move will create about 300 jobs.
The Burnaston assembly complex, building only Avensis, and associated engine plant on Deeside, North Wales, lose money because they operate well below capacity. Production will be increased by a third.
Toyota can save money by operating the modern Burnaston plant at maximum capacity of 220,000 units a year and reducing production capacity in Japan.
The decision mirrors Ford's move to stop car assembly at Dagenham, London, and shift Fiesta build to Germany.
Multi-national car producers are being forced by economic pressures to use plants as close to capacity as possible. Renault/Nissan may make the new Micra in France instead of Sunderland.
Toyota's move is a surprise because it built a Yaris plant in France rather than extending Burnaston.
The carmaker blamed the UK's position outside the eurozone and wants the UK to adopt the single currency as soon as possible.
Bryan Jackson, Toyota senior manufacturing director at Burnaston, said on the BBC Radio 4 Today programme this morning: "We are trying to survive a difficult period caused by the relationship of the pound to the euro. Although we are committed to the UK and have a longterm future here.
"We can't sit still. We have a responsibility to ensure Burnaston survives."