Mitsubishi is expected to drop the Carisma in 2004 as it focuses on more niche models and its strength in 4x4 vehicles., p> Hans Tolenaar, European sales chief for Mitsubishi, said: “Selling Carisma as a volume car is difficult.”

The Carisma is built at NedCar in Holland in a joint venture with Volvo. That deal ends in 2004 when a new small car, developed in the alliance with DaimlerChrysler, will go into production alongside next generation Space Star.

Mr Tolenaar, executive vice-president of Mitsubishi Motors Europe, said that Hyundai was also likely to be involved in what is known as the Z-car project.

The 30% depreciation of the euro against the yen was making life tough for Japanese importers. “All models from Japan are being exported at a loss,” he admitted.

This has meant balancing out the distribution by reducing the volume of Japanese-built products. The success of the current Space Star was helping redress the balance. European-sourced vehicles would also be boosted by the Paris launch of the five-door Shogun Pinin which will boost the Italian-built range to 25,000 units a year.

Mr Tolenaar said that a diesel-engined Pinin was being considered and that might help push sales up to the 40,000 maximum capacity at the Pininfarina plant in northern Italy. Mitsubishi sales across Europe were expected to be about 175,000 this year, down from 186,000 in 1999.