Fuji Heavy Industries, which manufactures the Subaru car, says it will be producing diesel engines in Japan from next year.

In an interview with Japanese news outlet Kyodo News, company president Kyoji Takenaka revealed the firm would use the proceeds from a partnership with Toyota to start manufacturing the diesel models in Gunma Prefecture in 2007.

Based in the Gunman town of Oizumi, the plant will mark an important stage in the development of Japan's next-generation vehicles, with Mr Takenaka hoping to take the firm into a new era of clean cars.

"We decided to launch the production of diesel on our own" he declared, adding that the firm was also making use of Toyota's hybrid technology.

"The need for diesel-powered vehicles is spreading," he added.

Mr Takenaka predicted that as many as half of the vehicles the firm sells in Europe will be diesel-based by the end of the decade.

Earlier this year Fuji announced details of an agreement with Toyota based on the Japanese automotive firm's purchase of 8.7 per cent stake in it.


Ÿ Adfero Ltd