Honda's new hybrid car to be the cheapest in Japan at Y1.6 millon

Honda Motor Co plans to produce a hybrid version of its popular Fit compact car for around Y1.59 million or $18,600, the cheapest amongst gasoline-electric vehicles sold in Japan.

In a bid to counter the unrivalled popularity of Toyota Prius, which sold 204,882 units between January and July compared to 26,000 units of the Honda Insight, Honda plans to launch its new Fit to increase its sales in the hybrid category.

The company has been facing stiff competition from rival hybrid car maker Toyota Motors, especially in the development and sale of environmentally-friendly hybrid vehicles.

Toyota plans to unveil a new compact hybrid car, which will cover 40 kilometers per litre of gasoline at an estimated cost of around Y1.5 million in 2011, according to some reports.

Honda intends to sell its new Fit compact car, which is scheduled to be launched in October 2010 at around Y300,000 lower than the Y1.89 million it charges for its other hybrid Insight - the cheapest model, released in February 2009.

It will, however, be priced at about Y400,000 more than Fit's gasoline-powered version, reports say.

Fit will give 30 km per litre, much more than the 24 km of the existing Fit model and will be fitted with a 1300 cc engine and an electric motor.

The Japanese government's subsidies on green-car purchases is scheduled to end next month, which could lead to a price war between Toyota and Honda, speculate analysts.