BMW is stepping up production of the Mini by up to 20 per cent as demand for the Cowley-built car continues to soar.

The company said sales of the car around the world had "exceeded expectations" and led to it revising its targets. Up to 120,000 cars are now expected to roll off the production line this year instead of the 100,000 originally estimated.

The firm also revealed that as many as 20,000 diesel models will be made from next year, boosting total output still further.

BMW spokesman Angela Wigley said: "We are seeing strong demand from our key overseas markets such as the United States and Japan, as well as from UK customers." Ms Wigley said no extra staff would be taken on as a result of the rise in productivity.

"We will retain the existing level of employment at the plant," she said. "We are starting to see productivity improvements as we move through the launch phase of the car."

Another key milestone for the new Mini is expected later this month when the 100,000th car since production started in April 2001 will be produced.

The announcements were made at BMW's annual general meeting by outgoing chairman Prof Joachim Millberg as he handed over to former finance board member Dr Helmut Panke. The diesel engine will be made by in Japan by Toyota and adapted specially to fit the Mini.

The 1.4-litre diesel engine was recently introduced into the Toyota Yaris supermini.

It is being brought in to compete with companies such as Renault and Volkswagen which have long featured diesel engines in their small cars.

Advances in technology in recent years have made modern diesels faster, quiter and more environmentally friendly than their predecessors.

Trevor Houghton-Berry, general manager for the Mini in the UK, said: "We're pleased the deal has been done and looking forward to adding another chapter to the Mini story. This is a great little engine that will complement the Mini's renowned chassis and handling.

"It is important that the Mini is represented in the growing market for small diesel cars and as with the Mini One, Cooper and Cooper S, we'll ensure that the diesel Mini will be the most desirable car in its field."

The high-performance supercharged Mini Cooper S model goes on sale in the UK on June 8.