With the new 2010 Honda Insight hybrid already undercutting the current generation Prius in price, Toyota started to worry that Honda's hybrid proposal will have a serious advantage over the next-generation 2010 Prius as the latter will carry an even higher sticker.

According to Japan's Nikkei Business daily, Toyota is planning to confront this problem with the introduction of a new, low-price, hybrid subcompact model that could find its way to overseas markets. Nikkei claims that the new gasoline-hybrid car will use many modified parts from the Prius with power coming from a smaller engine than the current model's 1.5-liter unit. The new model, that could hit the market as early as 2011, will reportedly cost lesser by 20% to 30% than the current Prius hybrid, which starts at 2.33 million yen.