Tokyo, 17 March 2009: An intensifying race for the coveted title of "greenest" carmaker has pitched Toyota and Honda into a worldwide price war on hybrid cars that could see models in Japan selling for under £14,000.

According to car dealers in Tokyo, the looming confrontation would almost certainly force the world's biggest carmaker to make "quick and deep" cuts to the price of its flagship Prius model or risk Honda's Insight stealing the momentum as the world's most recognisable hybrid electric car brand.

The basic Prius model currently sells for 2.3 million yen (£16,430) in Japan: company sources now say that the price may be slashed to just 1.9 million yen in an effort to remain exactly competitive with Honda. That order of price cut, despite the damage it will do to Toyota's bottom line, is expected to be replicated around the world according to the price of the Insight in each individual market.

Meanwhile, Toyota is preparing for the May launch of its new model Prius, and may now be nudged into bringing it into the market at close to the 2 million yen range in order to maintain its edge over Honda. The Nagoya-based company is understood to be working on plans for an even cheaper hybrid saloon to be released in 2011.

The impending showdown in the showrooms comes amid the most abject sales slump in Honda and Toyota's corporate history and the violent erosion of margins at what used to be among the most profitable companies in Japan. Markets that were expected to take up the slack from tumbling sales in Japan, the United States and Europe.

Toyota is expected to close its financial year at the end of this month with the first annual loss in more than 50 years. Honda may remain in the black, but the downturn has forced it to shed some of its most treasured divisions, including the Formula One racing team.

The gauntlet in the hybrid war was thrown down earlier this year and now sits proudly in front of Honda's head office in central Tokyo: a four-door hybrid electric car priced below the critical 2 million yen mark - a pricing point long viewed by industry analysts as the level at which anyone, regardless of their views on fuel efficiency or the environment, would consider buying one.

The announcement of the Honda Insight's price dealt a heavy blow to Toyota, whose 2003 Prius model had enjoyed strong sales growth around the world and suffered little in the way of competition from rivals: the Detroit carmakers' combined lack of a competitive hybrid model has allowed the Japanese giant to craft its "green" image with little in the way of competition.

Both Toyota and Honda are, however, girding themselves for the arrival of Ford's new hybrid sedan, the Fusion - a vehicle that is tipped to provide stiff competition with the Japanese carmakers, particularly in a thickening atmosphere of "Buy American" consumer nationalism.

Toyota recently announced that it had sold its one millionth Prius in the U.S market - a giant lead that will stretch Honda's marketing powers to their limits.

Courtesy: Times Online