Honda has rejected claims it will reduce the cost of the Insight to compete with Toyota’s planned cut-price small hybrid and its new, and cheaper, Prius.

Company President Takeo Fukui told US news site, Automotive News, the company would not enter a price battle with Toyota with the Insight (which has performed above expectations in the US).

“I think that is something we can’t do right now. We have to carefully examine the new Prius to know whether it is necessary for us to take certain measures,” Mr Fukui said.

The current Prius now sells for USD$22,000 in the US, but it is believed the new Prius will retail at around USD$21,000 when it arrives in May. This will mean that the base-model Insight, selling at USD$19,800 in the US market, will retain its price advantage.

Toyota’s new cut-price hybrid based on the Yaris platform however, is expected to sell for considerably less. But Honda won’t be heading down the cut-price path.

This news follows revelations Honda will end its production of diesel vehicles, instead focusing on the development of a hybrid drivetrain for medium to larger models.

According to Fukui, the decision was prompted by the excessive cost of ensuring diesel-engined cars meet regulations in the US and Japan.

“We have to think about the balance between cost and effectiveness,” he said.

“For larger vehicles, we think we might have to change the hybrid system so as to improve their efficiency. R&D is working hard on this.

“Even for larger-size vehicles, we think it’s more realistic to think about hybrids. Therefore, we have changed our thinking,” Mr Fukui said.