Toyota - due to confirm a small-car platform alliance with PSA Peugeot Citroen today - is tipped to be the supplier of diesel engines for BMW's Mini from 2003.
The Japanese and German car makers are understood to be close to shaking hands on a deal which could see up to 30,000 small diesel units produced at Toyota's new factory in France.
BMW had originally expected to meet full demand for Mini diesels from its Brazilian venture with DaimlerChrysler, but joint output plans were recently scaled down from 400,000 units a year to 250,000. Toyota's French factory is due to be operational within two years.
Head of production for BMW, Norbert Reithofer, said the diesel supply issue would not affect the annual production target of 100,000 Minis at its Oxford plant.