Major daily Tokyo Shimbun reported Friday that Toyota was in talks with General Motors about producing the Prius, now made in only Japan and China, at a joint venture plant in Fremont, California.
The newspaper, which did not cite sources as is common in Japanese media reports, said that adding another production plant will help boost Toyota hybrid sales.
Toyota is hoping to sell 1 million hybrids a year sometimes after 2010. Toyota took a decade before recently reaching cumulative sales of 1 million for the Prius, the world's first mass produced gas-electric hybrid.
Hybrids, which save on gas by switching between a gasoline engine and electric motor, are growing increasingly popular because of soaring gas prices and growing fears about global warming.
Other automakers, including GM and Honda, are trying to catch up with Toyota with their versions of hybrids.
"We are always considering the best places for production, but nothing has been decided about producing the Prius at NUMMI," Toyota said in a statement.
The majority of global Prius sales are in the U.S., where demand for small cars are surging. California has among the toughest emissions regulations in the world, helping making the Prius popular there.
The Tokyo Shimbun said the major components of the Prius will be shipped to be assembled at the NUMMI plant in California. Set up in 1984, NUMMI, or New United Motor Manufacturing Inc., produces the Corolla subcompact and other Toyota models.