TOKYO (Reuters) - Honda Motor Co said on Friday it would sell the hybrid version of its popular Fit subcompact for 1.59 million yen ($19,310) in Japan, making it the cheapest gasoline-electric car on the domestic market.
The company expects to sell about 5,600 units a month.
Competition in the hybrid segment is set to heat up as industry leader Toyota Motor Corp works to expand its line-up to meet growing demand for fuel-efficient cars from drivers around the world.
Toyota said last month it would produce a small hybrid model at its factory in France from 2012.
Honda needs the Fit hybrid to succeed after its last gas-electric model, the Insight, lost out to the third-generation Prius, which a top Honda executive admitted recently was an all-around better product than the Insight.
After becoming the top-selling model in Japan in April last year, the Insight has mostly fallen below 20th place in domestic car rankings, excluding 660cc microcars and despite generous tax breaks on hybrids.
But Honda chief executive Takanobu Ito brushed off the competition with the Prius, the top selling car in Japan for the past 17 months.
"They are totally different cars. Their price ranges are different and they look different. So I don't consider the Prius as the Fit's direct competitor," Ito told reporters.
"We just want many more people to own the Fit by expanding our line-up."
The Fit hybrid gets 30 km per liter (70.6 mpg) under Japanese testing methods -- equal to the Insight's mileage -- while keeping its signature spacious cabin that has made the gasoline version Fit a perennial top seller. The gasoline-only version, which underwent a partial remodeling, gets 24.5 km/liter.
With the electric motor assisting the 1.3-liter engine, the Fit hybrid gets performance equivalent to a 1.5-liter car, Honda said.
It said it has already received pre-orders for about 10,000 Fit hybrids.
Honda plans to launch the car in Europe next year. It is also considering selling the Fit hybrid in the United States but said it has not yet decided on the timing of a launch.
Rival Nissan Motor Co's remodeled March, which went on sale in Japan in July, gets best-in-class mileage of 26.0 km/liter when equipped with an idling system that automatically shuts down the engine at brief stops.
Reporting by Chang-ran Kim, Sachi Izumi and Antoni Slodkowski; Editing by Edwina Gibbs and Joseph Radford