Toyota Developing Small Hybrid

Toyota Motor Corp. reportedly is at work on a hybrid-electric vehicle smaller than the Prius that would compete with Honda Motor Co. Ltd.’s new Insight HEV.

The new Toyota hybrid will debut in 2011, retail for 20%-30% less than the current Prius and likely be a subcompact, Japan’s Nikkei business newspaper says.

Toyota Motor Sales U.S.A. Inc.’s Bob Carter, group vice president and general manager-Toyota Div., hinted Toyota was developing a rival to the Insight, telling Ward’s recently the No.1 request from the auto maker’s HEV owners is a hybrid smaller than the midsize Prius.

The ’10 Insight, which Honda claims is the lowest-priced HEV yet, with a U.S. starting price of $19,800 sans $670 destination and handling charge, features a 1.3L gasoline engine mated to an electric motor.

The ’09 Prius, with a 1.5L 4-cyl., begins at $22,000. Toyota is set to release the third-generation, ’10 Prius, later this spring.