TOYOTA and PSA Peugeot-Citroen are due to sign a memorandum of understanding on July 12 for joint development of a new vehicle platform. It will be used in joint production in Europe of small, entry-level cars for both companies, designed for European markets.

The alliance will be the second major partnership for PSA which is jointly developing diesel engines with Ford, and improves its economies of scale. Neither company believes it will lead to a 'shared' small car.