Insight and Prius

The new Honda Insight (above) is about $2,000 less than the Toyota Prius. Toyota may be planning a new hybrid model that is considerably cheaper than the current Toyota Prius (below).

“Hybrid affordability” is the catch phrase for the week.

Just days after Honda announced a base price of $19,800 for its new Insight hybrid, making it the least expensive hybrid to be sold in the US—more than $2,000 cheaper than the current Prius—Japan’s Nikkei business daily reports that Toyota plans to counter with a cheaper new hybrid model of its own. Toyota refused to comment on the report.

According to Nikkei, Toyota plans to develop a down-level model to the Prius with a US sticker price of around $20,500, in order to directly compete with the Insight. It could hit the market as early as 2011.

The third-generation 2010 Toyota Prius is due out this spring, but pricing has not yet been released. Analysts expect that it will have a base price very comparable to the outgoing model. Toyota’s relatively modest price point for the Prius, combined with the number one ranking for fuel efficiency, has been the one of the keys to the vehicle’s global success.

Even though the Insight will have the Prius beat on price, the Prius is a larger vehicle with better fuel economy. It has an EPA rating of 51 city/48 highway versus the Insight’s 40 city/43 highway. The Prius is considered a midsize sedan, while the Insight is a compact. The prospective future more affordable model from Toyota will be smaller than the current Prius, and will use a smaller engine, according to Nikkei. Although it is too early to know, this downsizing could allow Toyota to surpass all current hybrid models in terms of fuel economy.

In Japan, the Insight ranked 10th in sales volume for the month of February, while the Prius came in at 12th. The demand for the Insight in Japan was so much higher than originally expected, that Honda is ramping up production beyond the initial 200,000 units the company intended to produce.