COMPANIES which collaborated on a new city car could soon be in fierce competition when the model reaches showrooms in Britain.

PSA Peugeot Citroen and Toyota are set to be locked into a price war over the 107, C1 and Aygo mini model which has just gone into production at a jointly-owned factory in the Czech Republic. Although UK prices for the three and five-door ranges are still to be announced, versions sold by the French firms are likely to cost up to £500 less than those sold by Toyota.

Speaking at the Geneva Motor Show, Peugeot chief executive Frederic Saint-Geours said his company’s version would be offered from €8,500 – about £6,000 – when it goes on sale in France in June.

Officials at sister company Citroen confirmed they were planning a similar strategy across markets in mainland Europe. A spokesman said executives were still debating the question of cashback offers on the car.