Toyota Motor Corp. will launch an all-electric car in China late next year, having turned to local partner BYD for key technology to finally make an affordable yet roomy small sedan, four sources said.

Two of the four people with knowledge of the matter described the car as an electric holy grail for Toyota which has struggled for years to come up with a small EV that is both competitive on cost in China and doesn't compromise on comfort.

The sources said the breakthrough was chiefly down to BYD's less bulky lithium-iron-phosphate (LFP) Blade batteries and its lower-cost engineering know-how — a turning of the tables for a Chinese company whose popular F3 saloon was inspired by Toyota's Corolla back in 2005.