Toyota is in talks to supply key components to its petrol-electric hybrid engine to Mazda, the smaller Japanese manufacturer and long-time affiliate of Ford, reported Financial Times.
A supply deal between Toyota and Mazda would be an embarrassment for Ford which is promoting its own hybrid technology and will expand production of environmentally friendly vehicles.
Ford sold two thirds of its 33.4 per cent stake in Mazda last November to raise cash but the companies said they would remain partners in product development and production.
Mazda had planned to introduce more hybrid models beginning in 2015 but a surge in demand in Japan appears to have convined it to move sooner.
Buying hybrid components such as batteries and motors from Toyota could allow Mazda to begin building a small hybrid passenger car by 2013, a source said.
Toyota and Mazda said they could not comment on possible negotiations.