Honda to roll out cheap new hybrid model in early '09

By Chang-Ran Kim, Asia auto correspondent

TOKYO (Reuters) - Honda Motor Co said on Wednesday it would launch a new, low-cost hybrid car in Japan, North America and Europe in early 2009 as it seeks to cut the lead of Toyota Motor Corp in the green car race.

Despite the pressure of record-high oil prices and concerns over climate change, fuel-efficient and low-emission hybrids still occupy a small niche in the global car market, partly due to their higher costs for both consumers and automakers.

Japan's top two automakers lead the industry in the fuel-saving technology which runs on both electricity and gasoline, but Toyota has dominated sales with its groundbreaking Prius model, which is only available as a hybrid.

Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, said it was hard to know whether Honda could challenge Toyota's dominance.

"When you say 'hybrid,' the image that really comes to mind is Prius," he said. "Honda is very dependent on the U.S. market, which is shifting towards things like hybrids, and for survival having a hybrid (model) is essential."

By twinning a conventional engine and battery-powered electric motor, hybrids currently add $5,000 or more to comparable gasoline models, a premium Honda Chief Executive Takeo Fukui sees coming down to around $2,000 in the next generation of hybrids.

"It is important to move hybrid vehicles from the current image-oriented stage to the new stage toward full-scale penetration," Fukui told a news conference.

Executive Vice President Koichi Kondo said Honda hoped to price the hybrid-only car under 2 million yen ($19,290).