According to The Sunday Telegraph, Toyota would become the 12th team in Formula One and could join the competition as early as 2001.

The Japanese company had stated its interest in F1 back in May.

Last month Toyota announced that it would be withdrawing its participation from the World Rallly Championships in order to focus fully on becoming a successful F1 team.

It was also reported that the giant motor company was planning to spend around £100m a year to maintain the team - with the initial task of designing the vehicle.

Toyota is said to be testing three different designs for a Formula One car at its base in Cologne under the management of project leader Alain Decortanze and former rally driver Uwe Anderson.

Another motor manufacturing super-power, the German-based BMW, will be joining the Williams team next year, as its engine suppliers.

Fellow German manufacturers Volkswagon is also rumoured to be interested in entering the sport.