Toyota is considering building a hybrid version of its Auris hatchback model in the UK.
If the plan goes ahead it would be the first petrol-electric car to be made in Europe, reports the Financial Times.
The move would also help Britain's attempts to position itself as a European hub for production of "green" cars.
Toyota would not comment further on the plans.
The company sells more hybrids in the US than it does in Europe.
Meanwhile the Government will today outline measures to encourage hybrid, electric and other low carbon vehicles in a broader strategy to reduce carbon emissions.
Ministers have also discussed with General Motors the possibility of bringing production of its electric Volt car to GM's plant at Ellesmere Port.