One easy way to provoke an instant hissy fit is to mention the words "Toyota Prius Hybrid" in any rival car maker executive's ear, particularly an American one, writes deputy editor Graeme Roberts. That often provokes a rant along the lines of "unfair assistance from Hollywood glitterati", "development subsidised by other models", "cynical attempt to prop up CAFÉ figures", horrible-looking little sedan", "diesels are just as economical" and so on.

There is a degree of truth in all of this. Toyota has been lucky in that its current Prius sedan has been embraced by a fair number of Hollywood stars, including one who reportedly bought five so the whole family could drive one. That seems to have rubbed off on a fair number of other Californians and there is a sizable, loyal owner group right across the States. Clearly, even in the land of cheap petrol, there are some people who don't relish emptying any more of their wallets than necessary into their cars' fuel tanks, while enjoying the I-care-more-for-the-environment-than-you feel-good factor that goes with a trendy hybrid.

Toyota now claims that each Prius is profitable but inscrutable Japanese eyes glaze over when the subject of specific numbers comes up. Given the enormous expense of all the R&D work on the Prius and other Toyota hybrids not yet exported, not to mention on-going fuel cell research, it's likely to have been amortised a little more widely than the company would like us to think. But, then, Toyota has deep pockets, and the 945 billion net profit for the latest financial year - up 53% - will keep 'em deep.

As for helping with the CAFÉ (Corporate Average Fuel Economy) ratings in the US, well, let he who does not import the odd dinky Oriental hatchback to offset the gas guzzling propensities of the six-litre V8 SUVS at t'other end of his range cast the first stone.

Claims the Prius is a horrible looking little sedan will soon be dispelled by the 2004 model year remake as a larger and quite attractive hatchback - though we think the styling will appeal more to Oriental and US eyes than those in Europe.

Which leaves the question of fuel consumption parity with diesels. Hmmm.

Certainly, there shouldn't need to be too much of a hard sell for the new Prius in North America. There is enough of a dedicated market there already which has soaked up pretty well all the current model that Toyota can allocate. In fuel economy terms, these buyers have only a tiny VW diesel range with which to make any consumption/performance comparisons and that is helped by the fact that Wolfsburg doesn't ship the more powerful, high-tech diesels to the US anyhow. Low sulphur fuel and emission laws permitting, it would be interesting to see how much Toyota - and Honda - hybrid sales in the US would be affected if buyers there could get their hands on the superb diesel-powered Audis, BMWs, Mercedes, VWs, Seats, Fiats and even, God forbid, Alfa Romeos Europeans can choose from.

All of which means that Toyota has a hard sell ahead of it for the new Prius in Europe where economy has long equalled diesel. Toyota Motor Europe's enthusiastic sales head, Thierry Dombreval, plans a buyer education programme on the environmental benefits of going hybrid and plans to promote his new D-segment-sized hatchback as a good car worthy of consideration alongside its peers regardless of powertrain. Although no-one in the press has yet to drive one, he claims the Prius will have strong performance, sharp handling and a comfy ride, a spacious practical cabin and state-of-the-art gadgetry.

Certainly the car has more cabin space than its predecessor - save for slightly cramped rear headroom due to a swoopy roof line - and bristles with innovations. Apart from more power from a more efficient drivetrain, its also notable for its electrically-driven air conditioning system - so you can stay cool when the petrol motor cuts out - and brake-by-wire electronically-controlled braking system.

Argue that diesel does the environment-friendly trick just as well with similar economy and you get short shrift from Hiroyuki Watanabe, research and development head of Global Toyota.

Watanabe-san argues that the number of cars in use worldwide is forecast to grow from 700 million today to 1,200 million by 2020 and that manufacturers must reduce emissions of global-warming carbon dioxide or CO2. The concentration of the gas in the atmosphere, measured in parts per million, was around 280 before the industrial revolution, is 370 today and is forecast to reach 700-800 by 2100, boosting average temperatures by 4-5 degrees C and raising sea levels. So an international target of 550ppm by 2100 has been set. By then, Watanabe sees 50% of the world's energy coming from non-fossil fuels, the production of crude oil having begun to taper off sharply from 2040 and the shortfall covered by natural gas, coal and other sources.

Watanabe acknowledges that diesel engines are more fuel efficient than petrol motors but says they also produce particulate matter (PM), a health risk, and nitrogen oxide which contributes to ground level ozone. New 'scrubber' technology such as the Toyota D-CAT system soon to debut on the European Avensis and that used on some PSA diesels, reduces those two by around 80% but requires low-sulphur diesel, which will take time to become universal, world-wide.

While acknowledging the third emissions-reducing technology, fuel cells, Watanabe says a further 10 years of development work will be needed before they are broadly accepted by consumers.

Referring to all three options, he said: "In order to maximise the results of technologies developed to reduce the environmental burden of automobiles, I think they need to be introduced quickly and popularised as widely as possible."

Watanabe's colleague Manabu Morisake, a general manager of planning, argues that the new Prius will be superior to diesel models because its overall performance as a D segment model will be better than the most efficient B segment diesels.

"One litre of petrol emits 15% less CO2 than one litre of diesel so, with the same levels of fuel consumption, there is a corresponding clear advantage in terms of CO2 emissions and our target is around 100 grams per kilometre."

Watanabe added that, to properly assess the impact of CO2 emissions and so-called 'greenhouse effect', car makers need to introduce Life Cycle Assessment, a method of monitoring resources and energy used, and their environment impact through the model life of a car, accounting for all stages from manufacture to disposal/recycling.

On that basis, a typical petrol engine becomes the reference with a score of 1.0, a state of the art manual transmission diesel scores 0.67, the outgoing Prius 0.63 and the new model 0.57. Fuel cell vehicles are expected to be in the range 0.6 to 0.8.

"Our ultimate goal, however, is 0.33, one third of the current petrol engine level," Watanabe said.

"By this we mean that within a decade or so we expect to have the technology needed to offset the pollution related to the doubling of the global car parc that will occur by 2020. It will then take another 10 years to introduce this technology widely into the market and this ambitious target should apply to all petrol, diesel and fuel cell systems.

"I think we have to face the challenge of reaching this ultimate goal, bringing down petrol and diesel to one third of the current petrol level. I believe advanced hybrid technology has a big potential to realise this ambitious goal."

Certainly, when it comes to hybrids, Japan has a clear lead. The new Prius is Toyota's second generation and arguably contains its third generation drivetrain - the original '97 version launched in Japan was considerably enhanced before US sales began in 2000. Honda, meanwhile, now has its Civic IMA, with second generation Integrated Motor Assist, following on from the dinky two-seat Insight coupe.

Detroit? Nothing until the end of 2003, when Escape SUV production for fleets starts. Regular Joes don't get a look-in until 2004, four years after Toyota and Honda both staked their first claims to the US hybrid buyer.