Toyota reportedly developing budget hybrid to take on Honda's Insight

The Toyota Prius may be the most popular hybrid in the world, but it appears as though the Prius is starting to feel the pressure of Hond's new Insight hybrid. Toyota is already planning to sell the current Prius alongside the all-new model in Japan to take on the less expensive Insight, but a longer-term solution is likely in the pipelines.

According to Japan's Nikkei, Toyota is currently developing a new hybrid model to better take on the Honda Insight. Toyota is eyeing the 2 million yen mark ($20,500) for the new model, which would closer match the Insight's 1.89 million yen price tag. The all-new Prius will hit the Japanese market with a price of about 2.33 million yen.

The new Toyota hybrid model will likely borrow most of its technology from the Prius, but the Nikkei says the new car will be a subcompact using a gas engine displacing less than 1.5L. The Insight uses a 1.3L engine.

No word on if Toyota plans to market the new hybrid model outside of Japan, but we suspect there is a pretty strong case for U.S. sales. Look for Toyot's Insight-fighter to hit the market in 2011.