TOKYO, Feb 13 Toyota Motor Corp. will finalise a decision in April on where to build its

TOKYO, Feb 13 (Reuters) Toyota Motor Corp. will finalise a decision in April on where to build its ultra-low-cost car currently under development, with India topping the list of candidates, a source familiar with the matter said on Tuesday.

Japan's top auto maker has said it wants a cheap family car that could sell for under 800,000 yen ($6,500) in India, Brazil and other emerging markets where it lags rivals such as Suzuki Motor Corp. and Hyundai Motor Co.

The Nikkei business daily reported on Monday that Toyota would build a new 100,000-units-a-year factory near its existing plant in Bangalore, southern India, in 2010, investing about 40-50 billion yen ($329-412 million).

The Wall Street Journal, citing an internal medium-term plan, had reported in November that Toyota would build a new factory in India as early as in 2009 to produce 150,000 low-cost cars a year. A Japanese newspaper partly held by Toyota reported a month later that the carmaker was mulling a factory in Brazil for production of the same car.

The source said a final decision had not been made, with Brazil still in the running for producing the car. But he said Toyota's top manufacturing officials had been visiting India frequently in recent months and were ''pretty much set'' on the site.

Toyota has a factory in Bangalore with annual output capacity of 60,000 units building the Corolla sedan and seven-seater Innova models. But it owns 430 acres of land at the site, enough to set up a few more plants for total annual capacity of 600,000 units.

Toyota needs a cheap, small car in India to compete in the biggest segments of the fast-growing market, where it sold just 48,000 vehicles last year, including the imported Camry sedan and Landcruiser Prado SUV. It has set a goal of controlling 10 percent of the Indian market by 2010, when annual sales are expected to nearly double to two million units or more.

Toyota executives have repeatedly said, however, that bringing costs down drastically while maintaining the brand's signature reliability and high quality was proving difficult.

While a production site would be chosen soon, development of the vehicle, including its design, was far from being complete, the source said.

Top Indian carmaker Maruti Udyog Ltd., meanwhile, is expanding its line-up of cheap, compact cars that qualify for lower taxes -- most recently with the diesel version of the Swift hatchback.

Maruti, majority owned by Japan's Suzuki, plans to invest a further 200 billion yen ($1.65 billion) by 2010 to expand capacity at car and engine plants.

($1=121.43 Yen) REUTERS PV DS1250