Toyota will stay in Europe's minicar segment as rivals quit or electrify

Toyota has committed to selling a minicar in Europe even as rivals such as Ford and Opel have exited the segment because of low profits.

The company will build a successor to the Aygo to continue the model's role "as an affordable entry point to the Toyota brand," the automaker said in a statement.

The Aygo successor will be sold with a combustion engine and is not expected to get a full-electric version, even though rivals are targeting the segment with battery-powered cars such as the Fiat New 500 and Renault Twingo Z.E.

"The A- (minicar-) segment is heavily dominated by products featuring internal combustion engines, illustrating that budget is a key consideration – and the market outlook sees this strong mix continuing, especially for customers where financial accessibility is a dominant factor," Toyota said in its statement.

The replacement for the Aygo will be based on the same GA-B platform as the Yaris small car and upcoming Yaris Cross small SUV, helping to reduce costs by pushing expected annual sales of GA-B platform cars to more than 500,000 in Europe, Toyota said.

"This volume achievement will help to deliver the economies of scale that are necessary to secure the key element of accessibility that A-segment customers demand," the company said.

Toyota gave no indication for the launch timing of the Aygo successor or whether it would keep the Aygo name, saying only it would arrive after the Yaris Cross, which launches later this year.

Toyota builds the current Aygo in its plant in Kolin in the Czech Republic, alongside its platform siblings, the Peugeot 108 and Citroen C1. Toyota took full ownership of the factory on Jan. 1. Previously it was a joint venture with PSA Group.

Toyota has said it will produce the Yaris at the Kolin plant in the future as well as maintaining current Yaris production in Valenciennes, France.

Production of the 108 and C1 is continuing at the plant, but Peugeot and Citroen plan to exit the segment, according to reports.

Toyota did not give any indication where the Aygo successor will be built, but it’s expected to stay at the Czech plant.

Toyota also did not say whether the new minicar would offer a hybrid version, but the car’s small size could make it difficult to fit a hybrid drivetrain.

Spy shots of the new model undergoing testing appear to show the car mixes the styling of the current Yaris with a raised ride-height, possibly to give it a more crossover look.

With 83,277 sales, down 17 percent, the Aygo was the third best-selling minicar in Europe last year after the Fiat Panda and Fiat 500, according to JATO Dynamics market researchers.

Sales of the Yaris, Toyota’s bestseller in the region, dropped 16 percent to 177,440.

Many automakers operating in Europe have either axed or electrified their minicars because they struggled to make a business case for low-margin cars that also pushed up their fleet average CO2 emissions, risking fines under European Union regulations to reduce greenhouse gases.

Ford has dropped its Ka and Opel axed the Karl and Adam minicars.

Renault launched sales of a full-electric version of its Twingo minicar in October. Dacia's Spring mini-SUV will arrive in European showrooms in the third quarter.

Fiat’s battery-powered New 500 went on sale at the end of last year.