In hybrid price war, new Prius battles Insight

The battle among hybrids comes amid a steep drop in auto demand that has hit Japan's top brands hard. Toyota is expecting a 350 billion yen ($3.67 billion) loss for the fiscal year through March — its first such yearly red ink since 1950. Honda is forecasting an 87 percent fall in profit.

Still, there has been speculation in the Japanese media that Toyota would not only set the new Prius price lower than initially expected at about 2 million yen but that it will also continue to sell the current Prius, matching Insight's price.

It would be an unusual move in the industry, where old models are discontinued. Toyota declined comment on the reports.

"The popularity of hybrids is going to pick up momentum very quickly because of their low prices," said Yasuaki Iwamoto, analyst with Okasan Securities Co. in Tokyo.

But the price war will also cut into profit margins from hybrids, already slimmer than those from regular vehicles, Iwamoto said.

Toyota has also cut costs required to make its hybrid system by about 20 percent to 35 percent, Otsuka said, while not giving specific numbers. To keep the starting price tag low, frills and perks for the new Prius will likely be offered as options, according to Toyota.

Norio Ano, a Honda official overseeing Insight's development, said Wednesday that further cost-cutting and leaner production would be needed at Honda, if Prius is going to be priced close to the Insight.

"We will have to go back to scratch and review all our procedures from step one," he said. "It's hats off to Toyota if they can make it work as a business at the prices being reported."

An ingenious feature of the Prius is the solar panel on the roof, which powers an air-ventillation fan that works automatically while the car is parked so you don't have to get into an uncomfortably hot car.

Otsuka wasn't shy about his determination not to get beaten by the Insight.

It's no accident the marketing slogan for the new Prius is, "the only hybrid for the earth," he said. He really believes Prius will continue to be the best in mileage, drivability and brand power.

The Insight gets 40 miles per gallon in city driving and 43 mpg on highways, not as good as the 48 mpg in city driving and 45 mph on highways for the Prius already on sale. The revamped Prius gets 50 mpg, according to Toyota.

"We almost gave up on reaching our goal for mileage but we stuck to it," Otsuka said. "The Prius is the iconic hybrid."

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