Toyota Motor Corp plans to develop a new low-price hybrid car aimed at undercutting rival Honda Motor Co's Insight, the Nikkei business daily reported on Friday.

The new gasoline-electric car will sell at below 2 million yen ($20,510) as early as 2011 in Japan, the Nikkei said, escalating price competition in hybrid cars.

Honda's Insight hatchback, launched last month at 1.89 million yen, logged orders of 18,000 units in its first month, more than three times its monthly sales target of 5,000 units.

Toyota plans to price its new model at about 20-30 percent cheaper than its current Prius hybrid, which starts at 2.33 million yen, by modifying Prius parts, the Nikkei said.

The new hybrid will be a subcompact with an engine smaller than the Prius' 1.5 liter engine, and sales may expand overseas, it said.

Toyota declined to comment.

Toyota plans to start sales of a new Prius model in May with a 1.8-liter engine, with prices starting at 2.05 million yen to match Honda's Insight.

Shares of Toyota were up 4.08 percent at 2,935 while Honda gained 6 percent. The benchmark Nikkei average rose 4.3 percent.

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