Siam Toyota Manufacturing (STM), Toyota's Thai engine production arm, is to build a $161m plant to boost the production of diesel engines.
By 2010, the new plant, which will be built on STM's current premises, will allow the company to produce 350,000 engines per year, 150,000 more than it presently manufactures.
Including gasoline engines, STM will then have an overall production capacity of 650,000 engines per year.
In 2007, STM produced 229,000 diesel engines, of which 72,000 were exported to six countries, including India and ASEAN member countries.
Toyota said the expansion at the STM facility is to meet increasing demand for its so-called Innovative International Multi-purpose Vehicles (IMV). Currently, the IMV series consists of three types of pickup truck, a minivan and a SUV.