Toyota makes Japan's top-selling hybrid car, but sales have been slipping.
Rival Honda is hoping to claw back further ground by releasing a hybrid version of its Fit compact model. Honda Fit, the subcompact also has an environmentally friendly hybrid engine now.
Honda's new Fit hybrid has gone on sale in Japan as the automaker expands a green car line-up that already includes the Insight and CR-Z sports car.
It will start at 1.59 million yen (US$19,160), the cheapest of the automaker's gasoline-electric cars, Honda says.
The launch comes after government subsidies designed to boost demand for green cars ended in September.
The Fit is a very important model for us. We have been putting our strength into developing the IMA (Integrated Motor Assist) system, making it simple and fuel efficient and we wanted to expand it. So it was only time that we incorporate it into our main models, says President and Chief Executive Takanobu Ito.
Japan's No. 2 automaker has no plans to sell the Fit hybrid in the United States, but will introduce it next year in Europe, where the model is known as the Jazz.
As for the future, we are considering the possibility, but have not made any decisions as of now, says Koichi Kondo, Executive Vice President and Representative Director at Honda.
Honda is locked in a tight battle with Toyota Motor Corporation in the hybrid market.
Honda says the hybrid version uses a 1.3-litre i-VTEC conventional gasoline engine and electric motor, allowing it to achieve a mileage of 30 kilometres per litre, according to Japanese calculation methods.
The battery is stored under the rear cargo area, so that it doesn't take up space in the car's interior and permits flexible seating configurations.
Kohei Hitomi, Chief Engineer at Honda's Automobile Research and Development Centre, says the software from the engine, which is used in its Insight model, has been slightly modified.
But there's some scepticism about whether a hybrid version of the Fit is necessary.
One question that you might raise about this car is whether the fuel efficiency improvement - the extra mileage you get from the hybrid - is actually worth it. Because the base Fit, the gasoline powered Fit, already is a small compact car that gives great mileage as it is. So the added benefit of a hybrid on top of that is somewhat marginal, some people would argue, says Hans Greimel, Asia Bureau Chief for industry publication Automotive News.
The upgraded regular Fit starts at 1.23 million yen (US$15,000) for the 1.3-litre engine and at 1.5 million yen (US$18,300) for the 1.5-litre engine.
Honda says customers have already reserved about 10,000 of the hybrid models and about 4,000 of the gasoline version. It aims to sell around 14,000 vehicles a month.