Toyota Auris Hybrid on the way
The new model will use the same 'Hybrid Synergy Drive' technology as the new Prius, with a 1.8-litre petrol engine augmented by an 80bhp electric motor.
Due to its smaller size and lighter weight, the Auris Hybrid should better the Prius' 89g/km carbon dioxide emissions and average of 72.4mpg.
It is also expected to be less well equipped and therefore cheaper. That would make it closer in price to Honda's Insight hybrid.
The new model is due to be unveiled at the Frankfurt motor show in September and should go on sale shortly after. Toyota is also planning a hybrid version of its RAV4 SUV, according to the report.