Toyota Motor Corp. will start selling a new hybrid car in 2011 that is more fuel efficient than its Prius, in a bid to keep pole position in environmentally friendly vehicles, a report said Thursday.

The new hybrid, based on Toyota's Vitz compact car, will have a fuel economy of more than 40 kilometres per litre, against 38 kilometres for the third-generation Prius, the Yomiuri newspaper reported, without citing sources.

It will have a price tag of about 1.5 million yen (15,600 dollars), cheaper than Toyota's existing hybrids, and is expected to be sold in Japan, Europe and the United States, the report said. A Toyota spokeswoman declined to comment.

Toyota has sold more than 1.25 million Prius vehicles since its launch in 1997, making it the world's most popular hybrid, but rival automakers such as Honda and General Motors are seeking to challenge its lead.

Automakers hope that the popularity of fuel-efficient vehicles, helped by government tax breaks, will re-energise the flagging auto market, which has been battered by the global economic downturn.

The Prius has been Japan's top-selling car in recent months as government subsidies spur strong demand for fuel-efficient vehicles.