Are we on the brink of a hybrid price war?

Honda has revealed that it plans to undercut the Toyota Prius on price when it launches its new hybrid vehicle next year, raising the prospect of a price war between the two Japanese auto manufacturers.

According to Associated Press reports, a senior executive at the company confirmed that the new five-door hybrid, planned for launch in April 2009, would be priced lower than Toyota's Prius in the US.

Currently, Honda's civic hybrid is priced at $22,600 (£12,110), $1,100 more than the base price for the Prius. But speaking at an auto industry conference in Traverse City, Richard Colliver, executive vice president of American Honda Motor confirmed that the company's next generation hybrid will undercut both the Civic and the Prius.

"We're targeting sales of 100,000 units of this new vehicle in North America, " he added.

The move raises the prospect of a price war with Toyota, which has established itself as dominant force in the booming hybrid market, announcing earlier this year that it has sold a million Prius cars since the model was launched a decade ago.

In related news, a study from the Massachusetts Institute of Technology (MIT) released earlier this month predicted the US could cut vehicle fuel use in half by 2035 through the adoption of lightweight hybrid and plug in hybrid technologies.

The report argued that a combination of policy measures, new technologies and initiatives to promote lighter more fuel efficient could result in the fuel consumption of new vehicles being cut by between 30 and 50 per cent over the next 25 years, resulting in a cut in greenhouse gas emissions and fuel use back to year 200 levels.