Currently, Toyota Prius, which is doing very well in the Hybrid market saw itself falling behind in competition with the more affordable and feature packed Honda Insight. It was also reported that the success of the Insight will be spinning off to the Honda Fit compact as well, which probably is the reason for such an action taken by Toyota.
Otsuka said "We are developing a low-priced hybrid vehicle like Honda's Insight. We are going to compete by expanding our hybrid-vehicle lineup to smaller hybrids, in the class of the Vitz [sold in Japan] and Yaris."
Otsuka is confident that the new compact hybrid vehicle will be the way forward for the company which is cheaper than the Prius. He said “ Toyota's hybrid strategy calls for bringing more core technologies in-house. The electric motor and inverter for the Prius currently are manufactured by Toyota. The company also is developing its own lithium ion batteries so it won't be overly reliant on its joint venture with Panasonic for power packs”
One of the top priority of the new Prius is its fuel efficiency while maintaining its price bracket as well as better aerodynamics. It will come with a standard 1.8liter engine which is 300cc more than its current version. Otsuka added that "The Auris platform was designed so it could also carry a hybrid system. By making it flexible, it can accommodate future overseas production and reduce costs."