Toyota is set to unveil a new minicar aimed at European markets at September’s Frankfurt Auto Show later this year. The new model will be similar in size to DaimlerChrysler’s Smart Fortwo and will be able to seat two passengers up front with space available for a small child behind the driver’s seat. According to Automotive News Europe, an inside source has revealed that we should see the car hit showrooms by the middle of 2008.

The carmaker’s presence in Europe is expanding rapidly, especially in the compact segments with production of its current Yaris and Aygo cars increasing from 59,445 to 73,877 and 27,527 to 30,109 respectively over the past 12 months to meet increasing demand.

There’s also rumors of Toyota planning an ultra-low cost vehicle for sale in emerging markets, a car that would sell for less than Renault’s Logan budget car at around €5,000. Pictured above is Toyota’s Endo concept developed at its European design studios, which features styling elements that are likely to feature on the upcoming minicar.

Other carmakers reported to be rushing new and affordable small cars include industry giants General Motors and Volkswagen as well as newcomers such as India’s Tata, with the latter planning to release a car for close to €2,000.