Toyota poised to join hybrid price war

Toyota has this week confirmed that it is developing a low-cost hybrid version of its Yaris model, designed to take on Honda's new Insight hybrid model.

Honda is preparing to roll out the latest version of its hybrid Insight in the US and Europe and is expected to significantly undercut Toyota's market-leading Prius. The current Prius model sells for about $22,000 (£15,000), while the Insight will be priced from $19,800.

Speaking at the unveiling of the next version of the Prius, which will be launched next year and will feature solar panels as well as a 10 per cent improvement in fuel efficiency, Akihiko Otsuka, chief engineer of the third-generation Prius told the Nikkei newspaper that the company was preparing a lower-cost hybrid.

"We are going to compete [with Honda] by expanding our hybrid vehicle line-up to smaller hybrids, in the class of the Vitz [sold in Japan] and Yaris," he said.

The new cars are expected to be launched in the early part of the next decade.

Otsuka's comments come as reports in Japan claim Toyota was considering reducing the price of the next-generation Prius when it launches next year to ensure it does not give away market share to its new challenger.

Several reports said that the company was considering pricing the new Prius at $20,940, significantly less than its smaller predecessor. Toyota declined to comment on its pricing plans for the new car.